Is the SA retirement fund industry keeping up with the sustainable investing trend?

Jessica Ground, Global Head of Stewardship at Schroders.

Intermediaries and trustees urged to adapt to South Africa’s growing appetite for sustainable investments.

The Schroders Global Investor Study 2017 – a survey conducted by global asset management firm, Schroders, of over 22,000 wealth investors* across 30 countries – has found that South Africa ranks among the top 10 countries** in terms of investors’ knowledge, attitude and behaviour regarding sustainable behaviours and investing.

Jessica Ground, Global Head of Stewardship at Schroders, says that South African retirement fund trustees and financial intermediaries need to be mindful of the country’s growing interest in sustainable investing.

“There definitely appears to be an upward trend occurring in the local sustainable investment space, with 89% of South African investors saying that sustainable investing is more important to them now than it was five years ago, and over three-quarters (77%) confirming that they have, already, increased their investment in sustainable funds, compared to five years ago.”

Ground says that this is in line with the global trend of sustainable investing being on the rise. “Globally, sustainable investing is growing in importance to investors with 78% of investors stating it is more important to them now than it was five years ago. Moreover, global investors are increasing the share of money they are allocating to sustainable investments – 64% of investors said that they have increased their investment in sustainable funds over the last five years.”

As such, it can be expected that retirement fund members and corporate retirement fund sponsors will increasingly call for sustainable investment options to be made more widely available within retirement funds by trustees, says Ground. “We expect to see members and corporate sponsors demanding a greater focus be put on environmental stewardship and human rights risk management, not only for the greater good but also to ensure the financial health of the investee companies themselves. This follows the school of thought that a business is actually in danger of financial loss when profitability is placed ahead of the environmental and social responsibility.”

Many South African retirement funds are already ahead of the curve in this respect, due to progressive requirements for pension funds in South Africa, says Ground. “In South Africa, responsible investing is included in a 2011 amendment to regulation 28 of the Pension Funds Act, which requires trustees and principal officers of retirement funds to ‘give appropriate consideration to any factor which may materially affect the sustainable long-term performance of a fund’s assets, including factors of an environmental, social and governance character’.”

The retirement fund industry is particularly significant in South Africa, in terms of both scale and impact, says Ground, so their commitment to sustainable investing is crucial. “The large size of the industry’s combined assets under management means that institutional investors have the ability – and responsibility – to positively influence the companies in which they invest.”

*South African wealth investors: term given to name of SA specific research sample. This research defines ‘investors’ as those who will be investing at least ZAR 150,000 in the next 12 months and who have made changes to their investments within the last 10 years.

**The full ranking[1] is below: