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Building wealth and improving lives

23 January 2017 Jonathan Faurie
Joanthan Faurie, FAnews Journalist

Joanthan Faurie, FAnews Journalist

Enlightenment can be described as the action of enlightening or the state of being enlightened. It started as a European intellectual movement of the late 17th and 18th centuries emphasizing reason and individualism rather than tradition.

This line of thinking continues to this day as we have become acutely aware that we need to leave a sustainable world for future generations to prosper in. Focus has shifted a bit away from self-actualisation to cumulative worth.

This is the purpose of the World Economic Forum (WEF) which was held in Davos each year. This year promises to be no different to previous years as the challenges we face on an economic level are at unprecedented levels.

Cumulative wealth

One of the major sore points in society is that a significant majority of the world’s wealth is held by an estimated 10% of the population. As the economic disparity grows in developing economies in Africa and Asia, a solution to resolve this needs to be developed.

Launched at the 2017 WEF, the Business & Sustainable Development Commission’s Finance Working Group findings outline a series of recommendations for regulators and business leaders to build a system to finance this disparity. It is believed that an additional $2 to $3 trillion of investment is needed per year to achieve the Sustainable Development Goals (SDGs) set at the forum.

Words into action

How can this additional investment be unlocked out of a global gross domestic product (GDP) of approximately $115 trillion that is currently earned globally? A media release by Investec Asset Managers points out that this is what is required to achieve the SDGs. Further, it is central to the Better Business, Better World report, released by the Business & Sustainable Development Commission.

As part of this initiative, plenty of literature is presented. The Commission’s Finance Working Group findings, presented in Ideas for Action for a long-term and Sustainable Financial System, is one of the important documents.

Co-authored by Hendrik du Toit, CEO of Investec Asset Management, Mark Wilson, CEO of Aviva, and Aniket Shah, Programme Leader of Sustainable Finance at the UN SDSN, the report argues that the financial system must be oriented towards long-term and sustainable outcomes and outlines a series of key findings and recommendations for regulators and business leaders in building a system which is aligned with sustainable development.

Key partnerships

The Investec release points out that recognising that financing the SDGs is a complex task, the report presented at Davos highlights that an unprecedented coordination between public sector organisations and private institutions are required. This includes significant reform within global financial regulation and financial institutions.

The importance of the business community’s twin roles are highlighted, both in terms of creating new financial products and as instruments and technologies needed at all scales for the SDGs to be financed and also as partners in working alongside governments. It also stresses the need for making the reforms necessary to the financial system in order for global savings pools to be more effectively aligned with global investment needs.

Key focus areas

The paper identifies five areas of specific focus:

-               the alignment of financial regulation with sustainable development;

-               standardising and mandating sustainability reporting for corporations;

-               getting sustainable infrastructure investment right;

-               supporting the formation of long-term pools of risk capital; and

-               supporting financial innovation that accelerates inclusion.

Commenting on the findings, co-author and member of the Commission Hendrik du Toit said, that BREAK as stewards of long-term capital on behalf of this generation, we cannot ignore the welfare of future generations.

“The investment industry and its clients can support the achievement of the SDGs by creating simple, standardized sustainability metrics integral to the investment process. We also need new streamlined partnerships with governments and communities that can reduce risks for everyone and bring more private investment at lower cost into sustainable infrastructure development.“

This makes sense, but is impossible without willing participation from the private sector and government. Is there a willingness from government to build cumulative wealth in society? This is a question that is not only relevant in South Africa, but in other countries.

Editor’s Thoughts:
This discussion is not a new one; it is one that has been taking place in South Africa for a number of years. The major obstacle is willingness; is there enough willingness from government’s part, and from the private sector’s part, to find a common way forward? How far are we from this? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

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