Sanlam, through its investment arm Sanlam Investments, has partnered with leading global sustainable investment house, Robeco, to tap into its decades long experience in sustainable investing. Darryl Moodley, head: tailored investments at Sanlam Corporate, and Lucian Peppelenbos, climate strategist at Robeco, look at ESG and pension funds locally and within a global context.
Retirement funds are uniquely positioned to drive Environmental, Social and Governance (ESG) investment in South Africa, insists Sanlam.
In South Africa, as with most nations, retirement fund assets are the largest source of invested assets in the country by a significant margin. This puts them in a singularly strong position to drive the shift to investing sustainably and for impact.
The 2022 Sanlam Benchmark Survey – an annual body of research into the state of retirement funds and retirees in South Africa, released in June this year – found that climate change was at the centre of the investment policy of 4.8% of standalone pension funds surveyed and a significant factor in 33.3% of funds surveyed. The research also found that there was an increased allocation towards ESG-type portfolios since 2021.
The role the retirement fund industry plays in driving ESG in a country
“The stewardship responsibility of retirement funds is huge. They can influence policymakers and the companies they invest in. They can certainly exclude some companies that they believe are not up to standard and send a strong signal to the market. However, they will remain invested in most companies – and this is where a strong approach to voting and engaging with companies to advance sustainability practices is vital.”Lucian Peppelenbos
Global sustainable investment trends
“At Robeco, we see that our sustainable and impact investing strategies are growing much faster than the traditional investments. Our biannual climate survey has shown that 75% of institutional investors globally see climate at the centre of, or a significant factor in, their investment policy.” says, Pepplenbos.
Three clear trends have driven – and continue to drive – the surge of sustainable investment in European retirement funds:
- The importance of ESG issues, particularly climate change, has become very clear. Sustainability is driving a change in markets that companies and investors must adapt to.
- An increase in scrutiny from society into the business practices of companies.
- Currently in Europe, regulation is an important driver. The implementation of the EU plan for financing sustainable growth has a large impact in terms of transparency, and on the ESG practices of asset managers and pension funds.
Navigating a “just transition”, bearing in mind the social impact
“Navigating a ‘just transition’ is a complex issue, as our economy is highly dependent on fossil fuels and will likely remain dependent over the next few decades. SA firms that are significant carbon emitters are also big employers, so it is important to be able to re-skill individuals as we navigate to an economy that is less carbon intensive. And for a country with significant unemployment and inequality problems, these issues are far more pressing. Additionally, emerging market countries – such as SA – emit far less greenhouse gases than developed countries, and should therefore be afforded a longer runway to transition away from fossil fuels.”Darryl Moodley