Sometimes, these climate activists be like crazy

If you follow the international newswires then, you might be excused for concluding that sections of the global climate activist community have lost the proverbial plot. Recent headlines that illustrate today’s opening premise include Sky.com: ‘Just Stop Oil protestors throw tomato soup over Van Gogh’s Sunflowers’; The Guardian: ‘Climate activists throw mashed potatoes at Monet work’; and Reuters: ‘Climate activists glue themselves to sports cars’. More recently, you will have read about British citizens scaling gantries over the M25 highway to ‘save the planet’ by causing multi-lane, multi-kilometre traffic jams…

Glue me to a car, and save the planet, why don’t you?

How different the world would be if instead of gluing themselves to building or cars, hurling food at cultural masterpieces, or inconveniencing their fellow citizens, activists who wished to make a difference had watched Sanlam Investments’ sustainability focused Critical Conversations, held November 2022. The discussion coincided with the 2022 United Nations Climate Change Conference (COP27) which took place in Sharm El Sheikh, Egypt from 6-18 November. These conferences seek to get governments to ‘pull together’ on climate change issues by, for example, setting long-term carbon emissions goals. 

Before hurling your morning coffee and / or donut at your screen, dear reader, allow the writer to segue from this ‘through the looking glass’ world of bunny-hugging and green everything to the day-to-day reality that climate-aware South African investors face. The four asset management experts assembled for the Critical Conversations panel discussion were tasked with explaining how impact investing could deliver sustainability ‘wins’ without compromising investors’ long-term returns. As panel moderator Lerato Mbele explained, impact investing involves “incremental, positive steps that bring about change in communities, countries and institutions”. Such activities also align with the United Nations’ 17 Sustainable Development Goals (UN SDGs). 

Getting to grips with impact and impact investing

The Oxford Dictionary offers a primary definition of impact as ‘the action of one object coming forcibly into contact with another’. Ahh, could this explain why the activists mentioned in our opening paragraph are so fond of the slap of mashed potatoes on the Sunflower still, or the pressure of a super glue covered hand on a supercar bonnet? This writer reckons that the activists have all but missed the secondary definition of impact, given as ‘having a strong [positive] effect on someone or something’. PS, we have added the word positive for clarity; positive outcomes are assumed in the context of the aforementioned SDGs. 

Nersan Naidoo, CEO at Sanlam Investments, offered a much-improved ‘impact’ explainer, saying that impact was “changing just one person’s life for the better”. And Andrew Johnstone, CEO at Climate Change Managers was also on point, describing impact as a combination of focus and scale. In his view, the key component is to be focused on what you want to achieve, and once you have a way to achieve that outcome, to replicate it. Mbele then challenged the panellists to clarify impact in the asset management context. How do you allocate capital, keeping in mind that you are managing that capital on investors’ behalf, to address issues around people, the planet and shared prosperity? 

Hark! Climate is not the only sustainability issue

Naidoo pointed out that South Africa was confronted by a broad range of SDG-related shortcomings, including the effects of climate change and issues around education, gender, inequality and poverty to name a few. “In the context of today’s debate, impact is about how we make meaningful and lasting change to all of the challenges that global citizens are facing today,” he said. “Impact investing is the mechanism that we can use to deliver that impact”. Asset managers must mobilise capital to make meaningful impact, and gradually shift the status quo towards the utopia envisioned in the 17 SDGs. 

“The point of impact investing is to use capital to bring about change,” agreed Johnstone. “But we must understand what change we are seeking to achieve”. From Johnstone’s perspective, climate and climate change were “paramount”, however, he conceded that none of the complex sustainability challenges set out under the 17 SDGs could be addressed in isolation… One cannot, for example, remain narrowly focused on climate change initiatives without considering the consequences for biodiversity and a range of social outcomes too. It is also worth considering the trade-offs that go hand-in-hand with each sustainability goal. For example, one must consider the potential social stresses that will follow if South Africa overreaches its net-zero carbon emissions commitments. 

Partnerships held up as critical for success

Sanlam Investments is tackling impact investing in partnership with Netherlands-headquartered asset manager, Robecco. “We got into a partnership with Robecco because they are recognised leaders in sustainable investing; they have been doing it for 25 years and are amongst the best asset managers in the world in this discipline,” said Naidoo. Impact investing thus takes various guises, including directing capital towards listed companies that measure up on their environmental, social and governance (ESG) scorecards; ongoing engagement and stewardship of company management; and direct investing in projects with the potential for impact. 

According to Naidoo, impact investing does not mean compromising the financial returns that you offer your investors: “there does not have to be a trade-off between doing good and making money; you can improve the financial returns that you offer your clients by investing sustainably”. 

Mbele used the opportunity to explore ESG versus impact, i.e., are they one and the same? “Some people will say they are one and the same,” mused Naidoo. “But we think of impact investing as where we can see a direct benefit, whether it be creating jobs or decarbonizing the atmosphere … in our world, ESG references the frameworks that we use to engage with listed companies where we have invested capital but do not have a direct lever to effect change”. In short, ESG and impact are not mutually exclusive, they are different mechanisms seeking to achieve similar outcomes over the long-term. ESG is more relevant to financial advisers who advise retail clients on investing discretionary savings; impact is more relevant to institutional investors, most notably retirement funds. 

Sometimes, blends are best

Johnstone mentioned blended finance as the standout mechanism for raising capital for impact investing. “This capital needs to be more risk absorbent [and we achieve this by] combining public sector capital with private sector capital,” he said, adding that projects often involved collaboration between national governments and key financial institutions, such as Sanlam, to deploy capital to strategic areas of need. Sanlam will soon boast three blended finance solutions thanks to existing offerings in renewable energy and ‘water and oceans’ and a soon-to-be-launched green hydrogen fund. “We are extremely optimistic about what we can do to contribute to South Africa’s long-term sustainability; and we will absolutely keep doing it until we get there,” concluded Naidoo. 

Writer’s thoughts:

We enjoyed the quote that Mbele used to close the latest Critical Conversation, being from motivational guru Tony Robinson. His comment: “The only limit to your impact is your imagination”. What adds more impact to your and your clients’ lives: impact investing, or doing something small every day to make a personal contribution to improving people, the planet and humanity’s shared prosperity? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].

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