WEBINAR | How ESG additionality can drive socioeconomic development

As listed companies, we are preoccupied with becoming the best performer in international and local ESG rankings.

Many companies can attain excellent performance in these rankings, but identifying the sustainable impact associated with this performance is a challenge. Why is this the case?

I contend that good ESG performance is never a race to the top. No two jurisdictions will have the same ESG challenges and benefit from the same impact investing strategy — the principle of partnership for impact must drive it. Companies should be measured on how they have leveraged collaboration and investment to deliver sustainable impact to the beneficiaries of socioeconomic investment.

As an engagement platform, the inaugural Sanlam ESG Barometer provides an opportunity for companies to define what good ESG investment looks like from the beneficiaries’ perspective.

This first report of its kind in SA will also provide an assessment of the activities initiated by JSE-listed companies, to improve environmental and social outcomes in society.

The Paris Financial Centre Impact Task Force says impact finance is an investment that aims to accelerate the just transformation of the economy by providing evidence of its beneficial effects. For ESG impact investment to attain additionality status, it should allow beneficiaries to increase the impact generated by their activities.

This is not a simple aspect to determine as you must have a long-term view of your investment return and be open to allowing the partnership to stretch every rand you invest. The challenge is when ESG impact investment has to meet compliance requirements and receive accolades to increase company ratings — it becomes a challenge to embrace partnerships and assume a long-term view of working with beneficiaries.

How do we stretch R1 to ensure it accelerates the just and sustainable transformation of the economy by providing evidence of its beneficial effects?

First, identify the real economy need and appropriate impact investment vehicle. This cannot be conceived in the boardroom with company ESG specialists discussing what beneficiaries require and how they will provide the solution.

This should be a consultative process which starts with a blank slate and the desire to create impact. Recipients of ESG impact investments will have a good sense of the need and possible solutions — as impact investors. We must approach this as a partnership from the beginning. 

Second, go beyond the philanthropic mindset — beneficiaries are not waiting to be rescued by a big corporate. This mindset does not result in ESG additionality because it is not intentional, and the measurement of long-term success for the beneficiaries is not essential. It can be seen as a handover to the needy.

Lastly, foster partnerships that create a significant impact in the economy. Going at it alone with the hope of creating ESG additionality will be like trying to boil the ocean.

The Sanlam ESG Barometer aims to engage with industry partners on the value of ESG additionality and identify opportunities to foster these partnerships. 

It cannot be “business as usual” when it comes to ESG additionality. We acknowledge that companies are measured on their performance against ESG rankings. However, this cannot be at the expense of creating an impact for beneficiaries.

The ESG initiatives and community beneficiaries we include in corporate glossy sustainability reports case studies should be the narrators of their success and partners to corporates.

Results are demanded of us collectively; there is no prize to be won by those who arrive at the top of the mountain, leaving an unsustainable and untransformed economy. 

About the author: Abel Sakhau, chief sustainability officer at Sanlam

Attend the Sanlam ESG Barometer conference

The Sanlam ESG Barometer, researched by Intellidex and published in partnership with Business Day, will be launched during a virtual conference on March 23.

During this virtual event, hosted in partnership with Business Day, experts will discuss topics such as:

• How SA is perceived by international investors;
• How local companies can attract global investors on the grounds of additionality rather than status quo ESG features; and
• The attitude of local investors towards ESG.

Click here to register for this online event now. 

This article was sponsored by Sanlam.