Sustainable investing: how to make a positive impact
FM Green Economy Dialogue highlights the need for 'climate-proof' investments and standardised ESG reporting
In a world battling extreme shifts in temperature and weather patterns, going green is an important factor in mitigating climate change and ensuring social wellbeing. For communities and clients who want to invest in the transition to a more environmentally friendly economy, a focus on environmental, social and governance (ESG) factors to help inform decision-making is vital.
Reporting has also becoming increasingly important as companies strive to balance a positive financial return alongside stakeholder expectations to generate a measurable and sustainable outcome.
These were among the issues discussed in the first of a series of Financial Mail Green Economy Digital Dialogues, hosted in partnership with Sanlam Investments, Liberty Two Degrees (L2D) and the Development Bank of Southern Africa (DBSA). (Watch the recording of this virtual event below.)
Moderated by Andile Khumalo, the panel for this discussion included Brian Unsted, an asset management executive and head of Good Spaces for L2D; Olympus Manthata, head of climate finance for the DBSA; and Jason Liddle, head of distribution for Sanlam Investments.
Good Spaces, the asset manager responsible for shopping malls such as Nelson Mandela Square in Gauteng and Promenade in Cape Town, is getting accreditations for all their buildings and meeting net zero targets for waste and energy, said Unsted.
The company is successfully diverting 80% of its waste from landfills by recycling and composting on an industrial scale. Two solar PV plants have been installed, with a third under construction at Promenade. Rainwater harvesting facilities have been introduced and water consumption reduced in the malls by using low-flow taps and more efficient air-conditioning.
Sustainable investing includes ensuring business resilience for the future, said Unsted. Investing in a project such as solar, for example, reduces a business’s dependency on Eskom, which is a good long-term strategy.
On the question of how a “just transition” plays out, he explained that though the move to a more environmentally friendly world would lead to a loss of jobs and profit, if it was carefully managed and planned it could also provide massive opportunities.
The DBSA’s climate finance facility, headed by Manthata and co-funded with Green Climate, was designed to remove barriers between the public and private sectors and increase financial flows to environmentally friendly projects by de-risking them. Projects include those with longer lifespans where only 50% of the project finance would need to be raised from a commercial institution. The DBSA uses its accreditations with sources such as the UN’s Convention on Climate Change to finance these projects.
The effect of climate on an investment needs to be fully appreciated over the long term, Manthata said. Referring to the recent floods in KwaZulu-Natal, he said taking shortcuts was irresponsible, with any benefits wiped out in a very short time. Investments need to be “climate-proof”.
He said the DBSA intends to achieve net zero by 2050.
ESG reporting and measuring needs to be standardised with science-based target to remove the risk of greenwashingBrian Unsted, head of Good Spaces for Liberty Two Degrees
Liddle’s role at Sanlam Investments is to mobilise listed and unlisted capital for impact. ESG principles and ensuring processes and frameworks are in place to ensure better environmental outcomes play an important role in attracting investment. A focus on ESG, he said, does not mean a loss of returns.
Protecting the environment has a strong correlation to the social aspect of ESG, said Liddle, because if the impact of risk to the environment is not properly managed, communities — including the poor — would be the most compromised.
He recommended tax incentives to encourage the use of items such as electric cars and green steel and said the cost of importing solar energy to the national power grid could be bridged by development finance institutions.
Manthata said that just transition was one level of change, which needed to be quantified and the potential impact on communities mitigated. The other level was global, where Africa has contributed less to climate change and should not be required to accelerate transition at the same rate as countries whose impact is greater.
Unsted said ESG reporting and measuring needs to be standardised with science-based target to remove the risk of greenwashing. L2D’s aim is to make a meaningful difference, with transparency and maturity. It aims to achieve net zero accreditation in 2023.
The panellists agreed that there should be a standard system to collectively report across the board but offered different advice on how to make a positive impact. Unsted said, “Set lofty targets. Try to make a difference”; Manthata advised, “Bring on board finance to advance your targets”; while Liddle said, “Get involved. Contribute. Upscale.”