Could green hydrogen be the answer to Africa’s sustainable future?

Hydrogen offers a potential pathway to a sustainable energy future and Africa is in a prime position to become a leader in the global hydrogen economy, making intermittent energy generation more viable. 

This is the sentiment of Andrew Johnstone, the CEO of Climate Fund Managers, who spoke at the recent Sanlam Investments Critical Conversations webinar, held to coincide with the 2022 United Nations (UN) Climate Change Conference (COP27).

Johnstone said blended finance, which is the strategic combination of public and private sector capital, offered the risk absorbency needed for impact investing.

Blended finance solutions can accommodate the new business models, multiple jurisdictions and technologies required in infrastructure projects that align with the UN’s 17 sustainable development goals (SDGs).

Sanlam Investments has become a practitioner of blended finance with three blended finance vehicles in operation. 

The Critical Conversations webinar, which focused on impact investing for change, was held against a backdrop of tangible climate change-related challenges, such as drought and flood, and a host of social issues like education, gender-based violence, inequality and unemployment.

Sanlam Investments’ focus is on investing to make meaningful progress. “Impact investing refers to the financial mechanisms that deliver on impact, how we identify businesses and how we mobilise capital to make an impact,” said Sanlam Investments CEO Nersan Naidoo.

Naidoo and Johnstone were joined by Mervyn Shanmugam, CEO of alternatives at Sanlam Investments, and Marthinus van der Nest, head of Amplify Investment Partners.

Naidoo differentiated between environment, social and governance (ESG) factors and impact. “Impact is best described as tangible things — where you see the direct benefit from the application of capital, where ESG references the frameworks you use to engage with listed companies,” he said.

“Both try to achieve the same thing, but one is more direct than the other.” 

Johnstone said climate and social issues could not be separated. “Unless we stop activities that prejudice the sustainability of the atmosphere, the social issues around crime, education, energy and water become increasingly difficult to address,” he said.

This reality is evidenced by only one of the 17 UN SDGs being climate-specific, while the rest focus on sustainability. The complex interaction of climate and social outcomes explains why SA and other African economies are insistent on achieving a just energy transition.

The consensus from this round of Critical Conversations was that impact and/or sustainable investing made sense for capital allocators and investors. “Impact investing pays for itself,” said Johnstone.

“As we transition into a green economy, we will find new ways to create and recognise value, and to return the capital that is invested into economic activity. We are creating a whole new asset class for the future.”

From Sanlam Investments’ perspective, achieving the UN SDGs and investing with impact towards a sustainable future are part and parcel of improving investors’ long-term financial returns. “We are committed to being an asset manager that makes a contribution to sustainability, this is our business purpose,” said Naidoo.

“Reaching the UN SDGs, making an impact or contributing to a more sustainable world is not a competition, it is something that we all need to work together to achieve.”

Watch the full discussion below: 

This article was paid for by Sanlam Investments.