Pay it forward

Pay it forward

You can grow your moolah while helping the planet and the people around you.
Silke Colquhoun explains how

Investing is only about money. It’s about riding the bulls and avoiding the bears to maximise your financial profit. Or is it?

Investors increasingly want more than hard cash; they want their money to be a force for positive change, to ‘make a difference’ for the greater good of society.

And the happy coincidence is that although it may sound like a strictly philanthropic gesture, sustainable and responsible investing can also make good business sense; you don’t have to sacrifice financial returns while doing the ‘right thing’.

The principle motivating responsible investing has become an everyday fact of life for most South Africans and touches our daily engagements in ways that we now take for granted. It may not be direct investing, but many of us are already giving back in daily financial transactions.

First steps

Take Nedbank’s Green Affinity range for instance. Launched as the first banking programme for environmentally conscious South Africans, it includes an investment account, credit card, current and savings accounts and insurance products. The more financially active the account holder is, the more money the bank will donate to green causes.

This way, more than R170 million has been raised for the WWF (formerly World Wildlife Fund) by Nedbank Green Trust in the 25 years since its inception. The money has supported about 200 nature conservation projects, such as livestock monitoring, sustainable fynbos harvesting and mobilising local communities against rhino poaching.

Another ‘invisible’ way you can ease into responsible investing is by joining a retail rewards programme, such as Pick n Pay’s Smart Shopper. Resist the cashback option and instead convert your points into a charitable donation: the list of good causes ranges from Stop Hunger Now and Doctors Without Borders to Food and Trees for Africa.

Then there’s the MySchool MyVillage MyPlanet programme, also free of charge, which works on the same principle: a percentage of your retail spend is donated to a worthy cause of your choice. The programme raises more than R36 million on average each year and has won ‘best CSR initiative’ in the International Loyalty Awards for the past three years running.

The concept of social responsibility is increasingly becoming part of our DNA.

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Why care?

Simply put, responsible investing means that ESG (environment, social and governance) issues are integrated into the investment process. These issues may seem nebulous, but if not addressed, they carry the threat of seriously undermining our society and economy. Examples of ESG challenges that we currently face include: extreme weather, risk of drought, flood and storm brought on by climate change, and vulnerable landscapes, as well as infrastructure and energy security, water scarcity, food security, land reform, unemployment, corruption, and weak education and health systems. They are big-ticket items, seemingly beyond the reach of ordinary citizens, which is where responsible investing comes in.

Investing for Impact

‘Impact investing is a relatively new field globally, so people are taking a number of different approaches,’ explains Xolisa Dhlamini, the lead researcher on the 2015 African Investing for Impact Barometer by the Bertha Centre for Social Innovation and Entrepreneurship, a specialised unit located at the University of Cape Town’s Graduate School of Business (GSB).

‘Some investors choose to prioritise social impact and are happy to achieve market or inflation-related returns, as long as they are making a measurable impact and not losing money. Others find they can have both – social or environmental impact and financial returns – and for them, both are equally important.

‘Then there are “thematic” investors, who invest in sustainability-themed areas such as renewable energy, and a broad range of other themes including climate change, women in business, forests and water education, health and safety, as well as SME (Small- and Medium-sized Enterprise) development.

‘For lack of a more fitting term, they are “incidental” impact investors, and their primary intention is to make returns without explicitly seeking to bring about measurable impact.’

Big versus small

Established financial institutions govern the impact investment market. Private individuals (also known as retail investors) make their presence felt by buying into ‘green’ unit trusts while the institutional investors (ranging from pension funds, insurance companies and banks) and Development Finance Institutions (such as the Development Bank of Southern Africa, the Industrial Development Corporation or the National Housing Finance Corporation) remain the larger players in the market.

These giants like to invest in dedicated intermediaries, for instance Old Mutual’s Development Impact Funds that strives to fill gaps in social infrastructure, notably in affordable housing and providing access to quality education. Other funds include Agri-Vie and the Mergence High Impact Debt Fund, which have also both been claimed by the Global Impact Investing Rating System (GIIRS) to be examples of ‘pioneer impact investment funds’ around the world.

Sub-Saharan Africa makes up 22% of global impact enterprises, according to the GIIN, which claims the ‘market is substantial’ and foresees some ‘significant potential for growth’.

‘Unfortunately, there aren’t yet many impact investing products available to retail investors anywhere in the world’ says Aunnie Patton, head of innovative finance at the UCT GSB’s Bertha Centre.

Currently, SA investors can put money into three socially responsible funds: the Prescient Living Planet Fund, the Element Earth Equity Fund and Nedbank’s Betta- Beta Green Exchange Traded Fund.

Patton says: ‘Our team is working on developing several products for retail investors with partners such as the World Bank. Other ways individual investors can get involved are crowdfunding and peer-to-peer lending; local examples are Thundafund and RainFin.

‘I would encourage investors to ask their banks and advisors to be on the lookout for any green and sustainable products. In order for banks to develop these products they need to see that there is a demand to begin with.’

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Way to grow

Across the globe, large finance firms are in the process of building their own in- house impact investing expertise. Given the fact South Africa is one of the most unequal societies in the world, there’s huge potential for innovative investing to create meaningful change.

So putting your money into a green unit trust could be a small but significant step.

Dhlamini says: ‘Most South Africans take out insurance policies for anything under the sun, but don’t invest their money. We need financial sophistication in terms of understanding the range of investment and risk products.’

Better financial literacy will help drive impact investing. As the market develops, ordinary South Africans will be able to put their money into social and environmental causes – to do well for themselves while simultaneously being Good Samaritans for the greater society.

Photography: Gallo/GettyImages, iStockphoto, Shutterstock
June/July 2016

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