Assets under management in sustainable investments (or, at least, in investments labelled “sustainable”), hit a record $1.7 trillion in 2020. But while this is positive on the face of it, it has also gone hand in hand with an increase in the scope and sophistication of “greenwashing”.
According to Kondi Nkosi, South Africa Country Head for Schroders, this makes it increasingly hard for investors – including asset owners, pension funds, and end consumers – to gauge which companies and financial institutions are actually driving real change through positive impact and what is mere trumpeting. “Apart from the recent announcement by the New Zealand government, ESG- and sustainability-related claims and credentials are largely unregulated and disclosures are – for the most part – not mandatory. As stakeholders, it’s up to us to demonstrate tangible impact.”
Speaking in light of Earth Day, celebrated globally on 22 April, he adds that, “Earth Day serves as a reminder that our planet and its inhabitants should be our number one investment.”
In an effort to address this, Schroders has unveiled its MyStory series, showcasing the impact that investments can have on society and how assessing this impact can help deliver risk-adjusted returns for clients.
Carolina Minio Paluello, Global Head of Product, Solutions & Quant comments:
“As investors, the way we direct capital not only shapes the financial returns we achieve, but also the type of impact we have on the world. Understanding the impact that businesses have on society and the planet is crucial in determining their true costs and ultimately their impact-adjusted profits.”
In the first episode we hear from Katherine Davidson, Portfolio Manager, Global & International Equities, who explains how a mobile-based payments system, pioneered by technology business Safaricom, has had a transformative impact in Kenya.
Safaricom is the largest mobile network operator in Kenya. Its 3G network covers 94% of the Kenyan population. In 2007 Safaricom launched a mobile-payments system called M-Pesa. M-Pesa has enabled millions of people to make instant and secure cashless transactions by SMS, without needing to have a bank account.
Katherine Davidson, Portfolio Manager, Global & International Equities, explains:
“Safaricom has an attractive track record of growth and profitability. With 75% of the Kenyan population being under the age of 35, it is also well-positioned in a young market where we expect businesses and services based on connectivity to boom.
“But, there is another part of its story, which is the transformative effect that M-Pesa has had on society.
“This technology has significantly enhanced the livelihoods of millions of Kenyans, lifting many families above the poverty line. Safaricom commissioned KPMG to quantify its wider societal impact and found that the ‘true value’ of its business was 10 times its profits and more than 6% of Kenyan GDP – driven by direct and indirect job creation, infrastructure and investments.
“In the same way we, as investors, monitor financial performance, we are also tracking the social and environmental impacts that a business generates.”
Watch the full MyStory video here.
Carolina Minio Paluello, Global Head of Product, Solutions & Quant continues:
“The way we invest is changing, driven by a fundamental shift in how companies are being viewed and valued. Where once we considered only risk and return, we now assess a third dimension – impact risk. At Schroders, we’re looking for businesses that are going to succeed in the long term. We believe that companies with a purpose that goes beyond profit will be more durable, which could mean better risk adjusted returns over the long-term for investors.”