JASON LIDDLE: Taking action today for a future generation of investors

In the next two decades $50-trillion will move from the baby boomer generation to a new generation of investors. Members of this new generation are discerning; they invest with transparency, accountability, traceability and, most importantly, purpose.

As we move to the “productivity revolution”, with millennials and Gen Z taking the reins, we need to ensure we’re meeting the expectations of two generations that are as concerned with making an impact as they are about making robust investment returns.  

The focus on impact and sustainable investing are here to stay; the question is how to meaningfully deploy money to causes that people care about. So, how do we catalyse a collective mindset shift and incentivise action? 

We must deploy capital more meaningfully

In public listed markets it’s about using environmental, social & governance (ESG) integration and stewardship frameworks to improve decision-making and engage with companies to influence their behaviours towards better outcomes. Asset managers need to be active owners — or stewards — that work with the companies they’re investing in to set sustainability agendas and measure progress against these goals.

The private unlisted market is about deploying capital into high-impact areas such as affordable housing, renewables, infrastructure, private equity to create jobs, and SME debt funding. Again, the focus must shift from just generating returns to also delivering on impact. It’s no longer profit and purpose. It’s profit through purpose.  

We must embrace ESG, equally

There’s an optimistic forecast that all investments will be managed through an ESG lens by 2030, but that doesn’t mean they’ll all be “green” funds. A recent SA equity manager survey showed that not all ESG factors are equal. Much emphasis is placed on the “G”, but there’s a small “s” and a missing “e”. With the focus moving to risk, return and impact, there needs to be more incentive to put equal emphasis on all three and recognise how interconnected they are in nature. 

We need to spot the gaps

There are many investable opportunities. In Africa, for example, we need to industrialise in a “greener” way. We don’t carry the challenging legacy and risk of stranded assets that hold other countries back. With 60% arable land across our continent, we need to think about agriculture — biofuels, protein alternatives, electric vehicles, solar and wind power. We can further use data to focus our energy and investments in exciting ways. 

We must recognise we’re all responsible

Another definition for sustainability is our response to protecting ourselves from human excess. At the household level there’s a material difference each of us can make by controlling our energy and water consumption, for example. Each day about 2-billion people go hungry, but about 30% of our consumable volume results in food wastage. A lot of this waste happens in our homes. We need to address these issues in our individual capacities to make a collective difference.  

We need new standards

We’re trying to find new benchmarks and metrics right now. For example, GDP — a measure specifically for productivity or consumption — can be complemented by measurable, aggregated and collective sustainability-driven outcomes. 

We need to materially mobilise the broader industry

Sanlam has invested its capital in its Legacy range of funds, for example, to create and preserve jobs. Importantly, it hopes to catalyse similar initiatives across the broader industry to develop models that incentivise capital inflow to address shared challenges collectively. We need to inspire each other to answer investors’ calls to do more.   

We need to look at wealth differently

We continuously underestimate how much climate change disrupts us. Just think of the recent “snowpocalypse” in Texas. We’re sitting on 14 “internet-size” potential revolutions, such as cryptocurrency, which are prompting us to reimagine ways we generate and distribute value. Our young people are frustrated that they haven’t participated in economic structures as much as the boomers did. They’re racing to catch up. It’s time to reassess priorities and get more creative. 

We need to invest in job creation

A University of Cape Town Liberty Institute study shows that between 2017 and June 2020 the number of ultra-poor individuals in SA earning below minimum wage increased by a staggering 6.6-million individuals (54%). We need young people to keep putting pressure on us to catalyse systemic change. In addition, there must be more of a focus on investing in social and health. Hopefully, data will show us the positive returns of investing in human development goals.  

We need renewable skills

A 2017 study by Stats SA showed that if we doubled the pace we upskill our people at all levels, we’d halve the rate at which technology displaces us. The world is shifting to a productivity phase focused on innovation. That also means a huge gap is growing, with significant technological displacement. We need to learn to distribute productivity more equitably in the future. There’s a data dividend coming, and we have to engage in economic rethinking about how value is distributed. Again, it’s about constantly renewing skills to ensure South Africans are future-fit. 

Regulation needs to keep up

Regulators need to be more forward-thinking and faster to amend regulations. We need urgency. During Covid-19 we had no choice but to act fast. There was a shared risk appetite; regulators and the public were willing to accept vaccination with time-sensitive testing.

Now, we face a real climate crisis, but we don’t recognise it. In Africa, 70% of our food sources will be heat-stressed by 2050, eliminating food security. We need to act with urgency. But there must be a shared risk appetite to do so. 

• Liddle is head of distribution at Sanlam Investments.