Impact investing is sculpting a new and inclusive Africa

Investors are fast realising they can bring about real change on the African continent by insisting that their capital is invested in an impactful and sustainable way. On an individual level, this means encouraging your asset and retirement fund manager to favour investments that achieve high environmental, social and governance (ESG) ratings. But you can also bring pressure to bear on the government to be more discerning about which “big ticket” infrastructure projects to approve.

It was no surprise that impact got top billing during the first Critical Conversations session hosted by Sanlam Investments recently. The asset manager assembled a panel of experts for a robust discussion about sustainable investment opportunities across the African continent: Andile Khumalo, CEO of KhumaloCo; Andrew Johnstone, CEO of Climate Fund Managers; Euvin Naidoo, faculty at Harvard Business School (speaking in his personal capacity); and Nersan Naidoo, CEO of Sanlam Investments.

These industry experts covered topics such as infrastructure development, climate change and fossil fuels, economic access, and unemployment. They asked the searching questions that every African should consider before handing over their savings to an asset manager, including:

• Why does sustainable investing matter?
• Will investing for impact reduce my portfolio returns?
• How can I ignore investing in fossil fuels when 95% of Eskom's power comes from coal? and
• Does the dearth of qualifying investment opportunities prevent asset managers from achieving sustainable investing outcomes?

According to the UN Conference on Trade and Development (UNCTD), Africa needs to achieve $150bn in infrastructure spending a year to meet the UN's 17 Sustainable Development Goals by 2030.

Sustainable investing matters because this capital must flow to projects that make a meaningful difference for the continent to have any chance of overcoming its environmental and social challenges. The panellists were unequivocal that the smart, impactful allocation of capital was essential to address climate change on the one hand and to tackle social challenges in areas like education, inequality, poverty and unemployment on the other in Africa.

Another important observation was that companies that feature near the top of environmental, social and governance (ESG) rankings tend to deliver higher market returns. The panellists pointed out that sustainable investing is about striking a balance between using and replenishing the earth's finite resources while considering the social impact on livelihoods still dependent on fossil fuels.

The challenges are particularly significant on our continent. Five of the biggest economies in Africa (Nigeria, Algeria, Morocco, SA and Egypt) are all still fossil fuel-driven. Therefore, the continent's transition to clean energy would have to be done in a just manner. 

Governments were encouraged to make the right policy framework decisions and expedite private-public partnerships to deliver critical infrastructure more efficiently. Most believe that African infrastructure programmes will benefit from blended finance models, wherein governments provide funding for the build phase and the private sector steps in to manage projects through the life cycle. 

The first Critical Conversations revealed a commitment to uplifting the African continent through sustainable, impactful investment in infrastructure. Among its conclusions was that long-term investments should be assessed through a dual lens of financial return and positive impact and that infrastructure projects offer great potential to broaden economic access and help eliminate inequality.

Sanlam Investments has partnered with the world-leading sustainable investment asset manager, Robeco, to drive education and uptake around sustainable investing opportunities as it positions itself to become a leader in sustainable investing in Africa. 

The next Critical Conversations session will take place on September 13 2021 and will take examine climate change, its effects and opportunities.