KUDA MUKOVA: How finance can future-proof our economies against disasters

The sharp and long tail of KwaZulu-Natal’s flood disaster has revealed SA’s vulnerability to climate, health and infrastructure disasters in sharp relief. As plans and budgets to rebuild trickle towards fruition, now is the time to deliberately break away from short-term financing to longer-term and sustainable finance to future-proof against the disasters and risks to come.

The good news is that future-proofing our economy through sustainable financing need not be overly layered and technical. Especially in SA right now, the simplest solutions are often the best ones. We need committed and open-minded financing that allows communities to rebuild their immediate infrastructure and homes, while offering a responsible safety net for business and society to hope for a safer future, while remaining prepared for disasters when they do inevitably strike.

The key here is a concerted move from traditional investing over the short-term in search for immediate and competitive returns regardless of environmental, social and governance (ESG) factors — to responsible impact investing.

Much has been said in boardrooms and management tomes about progressively screening investments and projects based on their ESG risk profile. But few people and businesses truly understand and apply these daily. The truth is that most projects, especially with high-risk socioeconomic and political profiles and subinvestment grades such as SA’s, remain vulnerable to short-term thinking.

But we must take a broader and braver view. We must take our ambitions a step further than mere rhetoric, and practically drive maximum effect solutions through sustainable and thematic impact investing. We are surrounded by glaring reminders of how important it is to align investment strategies and priorities with the 11th UN sustainable development goal, which seeks to make our cities and human settlements inclusive, safe, resilient and sustainable.

We have some inspiring examples from SA banks that we can look to. Rand Merchant Bank, for instance, is the lead arranger of SA’s first certified green bond, accredited with the Climate Bonds Initiative. The R1bn deal will be used to help alleviate climate challenges by upgrading Cape Town’s water infrastructure. This followed a devastating drought in the Western Cape — the government and business leaders in the Eastern Cape and KwaZulu-Natal should be paying close attention to these possibilities.

Several parts of Durban, especially the port at the heart of its economic hub, somehow continue to operate under extreme constraint following devastating flood damage. Industry stakeholders across several sectors have indicated that water and other infrastructure has been woefully insufficient and poorly maintained for many years. This lack of sustainable planning is causing millions of rand of industry losses, simply because there is no reliable running water. Port depots struggle to clean containers in time for the shipment of our exports and imports, compounding commodity backlogs.

The Standard Bank Group is focusing its financing on infrastructure projects that improve access to reliable and sustainable energy sources, with a heightened focus on renewable energy. This has been complemented by the group’s commitment to cleaning up its own house first, to achieve net-zero carbon emissions from their operations by 2040.

Looking abroad, Ant Forest (owned by multinational technology company Alibaba) is a mobile phone app that is channelling its users’ good intentions to practical projects. Ant Forest will plant trees in deforested areas when its users take a step towards reducing their travel-related emissions, going paperless or buying sustainable products. This app is currently nearing 1-billion users and has planted millions of trees, demonstrating an 8.6% reduction in users’ travel-related carbon emissions.

On the ground at home we need to take a deep look at the fundamental needs of our economy, and the ways in which the formal banking system supports and empowers informal and small traders. Integrated banking solutions for the everyday trader and SMME can improve their ability to continue stimulating the economy, especially in SA, where informal traders form an integral part of large township economies. Trust in the formal banking system has long been a hurdle that many informal traders never overcome. But if business payments are facilitated as simply, safely and quickly as possible, our economy can start to inclusively rebuild and grow.

This must be imbued within the public sector too — the government must continue to play its part, and take steps towards creating a low-carbon economy while allocating budget to financing green and sustainable projects for long-term, inclusive growth.

These issues and more should be part of the conversation at the upcoming ESG Africa Conference. But there’s so much we can do right now. SA can only move towards this future if financiers bravely invest and fund responsibly. There’s no doubt that we need to so urgently, and create a sustainable, robust environment that’s underpinned by sound financial safety nets over the long term.

• Mukova is a partner at IQbusiness.