Socially responsible behaviour is becoming the new normal, particularly among Millennials, and is set to drive demand for more responsible investment practices in the financial industry. This is according to Rob Johnson, the head of investments at Nedgroup Investments, who says although there is an increased appetite for responsible investing, a lot more has to be done if South Africa is to keep up with global trends.
Johnson was addressing a Responsible Investing Workshop hosted by Nedgroup Investments in Cape Town recently. The workshop featured presentations from the Cambridge Institute of Sustainability, BlackRock, MSCRI and Avior, and examined the progress being made in terms of responsible investing globally.
A study cited by Johnson, conducted by the Wisdom Council in the United Kingdom surveyed 1 000 investors in September on their engagement across ethical, green, impact, and environmental, social and governance (ESG) investment strategies.
The study found that more than one-third (37%) said they were more likely to invest in ethical funds via a pension, with the same percentage saying they would invest in ESG funds this way. More than two-fifths (43%) said the same for green funds and a third (34%) for investing in impact funds via a pension.
“As the global population gets older, Millennials are preparing to become the new market, and it’s clear that they will demand more transparency in terms of responsible behaviour from their brands, asset managers included,” Johnson says.
Nic Andrew, the head of Nedgroup Investments, said in his opening address: “The shortcomings of short-termism, capitalism and greed has never been more evident than over the past few months in South Africa, but society has finally found its voice. We are starting to see a regulatory focus on responsible financial practices, and investors are starting to engage more in demand for positive change, but South Africa is clearly lagging in this space.”
Johnson says that education and collaboration are crucial for the financial services industry to develop sustainable responsible investment strategies.
“Until there is client and investor buy-in, it will be very difficult to achieve anything sustainable. We have to engage with our partners to encourage more transparent reporting in line with our responsible investing codes. We must also communicate clearly with clients and advisers to inform them about how we are approaching the adoption of responsible investment policies,” he says.
The responsible investing codes are the pull factor driving change, but Johnson says the financial industry should strive to do more than meet the minimum requirements of these principles.
“The issues are complex, and it will take time. But it is time to open the dialogue as to what responsible investing in the future will look like and how we will get there in a practical sense,” he says.
Johnson says Nedgroup Investments plans to evolve the understanding of responsible investing within its stakeholders and leverage the knowledge of experts and foster discussion on the topic.