Category Investments

Big corporates comment on their inclusion in Satrix Inclusion and Diversity Index

21 June 2022 Satrix

Just nine months after launching the country’s first exchange traded fund (ETF) based on the inclusion and diversity (I&D) status of listed companies, Satrix says the fund’s premise – that companies with strong I&D are inherently more likely to succeed for a range of factors – is showing dividends, with a good performance versus the rest of the market.

The latest rebalancing of the fund saw Truworths (TRU), Standard Bank (SBK), Raubex (RBX), Momentum Metropolitan (MTM), Motus Holdings (MTH) and Life Healthcare (LHC) being newly included in the index. Holdings were increased in Mondi PLC, PPC and Vodacom, among others.

“The Satrix I&D ETF is constructed from the 30 companies that rank highest on their combined diversity, inclusion, people’s development and controversy scores,” says Siyabulela Nomoyi, Quantitative Portfolio Manager at Satrix, a division of SIM. “It uses research to identify the local firms that are performing best in terms of disclosing company policies and ensuring better workplace implementation of employee opportunities, among other measures.”

The ETF tracks the Refinitiv Satrix South Africa Inclusion & Diversity Index, which was developed with Refinitiv, an LSEG business. “This index recognises companies that have entrenched inclusion and diversity throughout their corporate culture and seeks to harvest the innovation and collaboration benefits, and return dividend, that this commitment yields,” says Nomoyi. “Our fund presents opportunities for both retail and institutional investors to satisfy their ESG and responsible investment appetites in a single transaction.”

Major firms sing I&D index praises

MTN has been part of the index since inception, and ranked fourth on the latest I&D index with a score of 71,95 points. “Based on our engagements, ESG is an increasingly critical lens through which investors assess our investment case and investment opportunities more generally. The ESG profile and ESG momentum of a company has become an important driver of its share price return,” wrote MTN on news of its inclusion. “Creating shared value is one of the strategic priorities of our Ambition 2025 strategy, and, as an integral part of that, we have taken a step change in our approach to sustainability. We are humbled to be included in the Satrix I&D index, which gives us some encouragement that we are on the right track and inspires us to do more to be a force for good in our markets”.

Nedbank CFO Mike Davis welcomed his firm’s inclusion in the index too. “Our inclusion in the Satrix I&D ETF is testimony to the progress we have made on matters of inclusion and diversity,” he said. “As a responsible citizen, ESG matters are high on the agenda for management and the board, and we believe that as a large company operating on the African continent, our inclusion positions us favourably among employees, clients, shareholders and other stakeholders”. Nedbank is presently the top ranked firm on the I&D index.

Gladys Naylor, Group head of Sustainable Development at Mondi, noted that creating an inclusive environment that fosters and respects diversity is vital to a firm’s success, and builds on its competitive advantage in becoming an employer of choice. “A diverse workforce thinks more creatively and responds better to local contexts, changing environments and different customer needs,” she said.

Brands that dominate the top five slots

As of 31 March 2022, the top five holdings in the I&D ETF were Standard Bank, MTN Group, Sasol, Absa Group and Vodacom Group. The highest ranking I&D index scores were Nedbank Group, Discovery Limited, Sappi Limited, MTN Group and Vodacom Group, in that order.

ESG remains top of mind among all stakeholders in the South African investment community, as the country grapples with high levels of inequality, poverty and unemployment. There is a growing appreciation of the value of impact and sustainability in asset allocation, with every rand repurposed towards such outcomes seen as money well invested! And it helps that money can do good while generating a profit.

Short-term performance

“The Refinitiv Satrix South Africa Inclusion & Diversity Index achieved 12.35% on a year-to-date (YTD) basis with a 23.89% total return over the last year to 31 May 2022. This compares favourably relative to the 3.06% YTD and 11.03% 12-month return from the FTSE/JSE All Share Index over the same period, translating into significant outperformance versus the market. Although it is still early days, this performance demonstrates that a focus on Inclusion & Diversity can tip the scales in investors’ favour.”

JSE-listed firms recognise inclusion and diversity as important drivers of their ESG, impact and sustainability outcomes. Nedbank Group noted that a diverse workforce thinks more creatively and responds better to local contexts, changing environments and different customer needs. The banking group felt that “speaking about the value of diversity and inclusion, and making inclusion part of its DNA” was non-negotiable to attract top talent from under-represented groups.

“We believe that diversity, equity and inclusion fuels innovation and helps the bank to understand the needs of the diverse clients and communities which we serve,” concluded Davis.

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