Alternative investments is no more just the realm of visionaries
Over the years, there has been a visible shift in focus from conventional forms of generating energy to alternative energy sources which are cleaner and more sustainable over the long-term.
While this may seemingly have little to do with the investment industry, it does. Commodities have been the preferred form of generating alpha for a number of years now, and resources stocks are inextricably tied with this.
But the days of investing purely in a commodity are seemingly coming to an end as investing in humans and improving improvised communities starts to become top of the agenda for many companies.
Look at your world
This was the case presented at the recent Old Mutual Responsible Investment forum where a number of key issues were highlighted on the day. One of the foremost issues is the world that we are going to retire into.
We are all caught up in saving towards our retirement, and rightly so. However, have we taken a step back to look at the world that we will be retiring into? This was an important question asked by Old Mutual Investment Group CEO Diane Radley. “We need to cater for our needs today without compromising on the needs of tomorrow. It’s about creating a socially viable world for people to retire into. Large corporates have the ability to wield significant influence and to decide when and how to do this,” says Radley.
Radley points out that currently, seven out of the top ten inherent risks in the world are sustainability risks. Statistics show that by 2050, the global population will grow to 9.6 billion people with the population growing by 800 million people every year between now and then.
Go alternative
This is a story that has been prominent for a number of years. The reality of this is compounded even further when we realise that the level of urbanisation will most certainly increase because of this. This puts significant pressure on urbanised areas.
How do we cater for this population increase? Scientists believe that we have already entered into an age where humans are consuming more resources than the planet is able to produce. When the world’s current oil resources run out, we will have no more. The story is similar with coal.
We need to shift our horizons towards non-traditional asset classes. Paul Boynton, Chief Executive of Alternative Investments in the Old Mutual Investment Group, points out that worldwide, there is currently R52 billion in assets under management in these classes. And he believes that the case for moving more assets into this space is strong. “The returns on alternative asset classes are high when compared with conventional asset classes; and will only get higher,” says Boynton.
The African story
Commodities are an abiding aspect of the global economy and it is estimated that around 30% of the global mineral resource endowment sits in Africa. To access this future value requires the development of economic and social infrastructures, as well as positive sentiment in the global investor community.
Because of the significant population increase, food security will be a significant issue. Boynton points out that Africa has close to 60% of the worlds uncultivated arable land. This is significant on many levels, not least of which is cultivating this opportunity in a manner that ensures long-term, sustainable yields. This will not only be in terms of produce, but also with respect to social and financial benefits.
A much cited indicator of Africa’s attraction as the global epicentre for economic potential is its attractive demographics. We have already touched on the global population increase to 9.6 billion. This is a growth of two billion people on the world’s current population. Of this growth, one billion will be in Africa. This means that in the years to come, the working age in Africa by 2035 will for the first time be greater than that of both India and China.
Editor’s Thoughts:
There is a significant global trend of embracing alternative energy resources and associated commodities over conventional ones. One just needs to look at where there is potential for this growth. Africa has been attractive for a long time and will only grow in popularity in the future. Companies who are not focused on African growth may find themselves missing the boat while the rest of the world is experiencing growth. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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