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SA Investors’ sustainable investment ambitions fail to reflect their actions, study finds

By: Schroders

Mirroring a global trend, the proportion of South Africans who are actually investing sustainably is significantly lagging behind those who would like to invest sustainably, indicating that a gap exists between investors’ intentions and their tangible actions.

This was revealed in the recently released Schroders Global Investor Study 2019, which surveyed over 25,000 investors across 32 locations around the world. The study has found that 22% of South Africans invest sustainability (higher than 16% globally), compared to 31% who are interested and would like to invest this way. This is on par with international study findings, where 32% of people globally are interested in sustainability and want to invest in a sustainable manner.

Speaking at a recent event held in Sandton, Johannesburg, to unpack the study, Jessica Ground, Global Head of Stewardship at Schroders, said that the results indicate a gulf between people’s sustainable investment aspirations and the reality of how they prioritise these factors in their investment decision-making. “A significant proportion of investors clearly believe that sustainable investing is important, but this is yet to translate into tangible action for the majority.

“This will unfortunately leave investors vulnerable to the global impacts caused by issues such as climate change. It is therefore important that asset managers and the broader industry – including the likes of policymakers globally – work with investors to ensure they can better identify the benefits of sustainable investment and, in turn, are able to access funds which will enable them to do so.”

This vulnerability, Ground says, explains the high levels of excitement around the recent announcement that the Schroder ISF Global Sustainable Growth fund has been approved for distribution in South Africa. “Local investors can now invest their offshore investments in a dedicated fund focused on companies with strong Environment, Social and Corporate Governance (ESG) credentials.”

Interestingly, the study found that many South Africans also feel strongly that all investment funds – not just those specifically designed as “sustainable investment funds” – should consider sustainably factors. Almost a third (32%) of South African investors said that they strongly agree with this – 9% more than the global average (23%).

Investors will therefore welcome the news that Schroders this week announced its commitment to integrating ESG across all of its investment strategies by the end of 2020. This news was relayed at the event by Charles Somers, who is a co-Portfolio Manager on the Schroder ISF Sustainable Growth Fund and a Global Sector Specialist focusing on the Consumer Staples and Consumer Discretionary sectors.

Somers noted, however, that ESG integration is already embedded in Schroders’ culture and investment process. “As an active manager, we see sustainable investment as an integral and necessary part of our responsibility. Our clients are increasingly asking for ESG to be embedded into their portfolios and, in turn, we are also constantly seeking to improve how effectively we integrate ESG across Schroders’ investment desks. It is not just a tick-box process.”

That being said, Somers made it clear that investing sustainably need not mean that investors must sacrifice on returns. As evidence of this, he referenced the fact that the three-year annualised performance (gross of fees) to September 2019 of the Schroder ISF Sustainable Growth Fund he manages was 14.1% versus the MSCI All Country World index benchmark return of 9.7% over the same period.

Another noteworthy finding of the Global Investor Study was that “Generation X” (aged 38-50) are more motivated by investing sustainably than other age groups, in contrast to the common consensus that “millennials” are driving sustainable investing efforts.

This, Ground says, confirms that sustainable investing is far more than just a “millennial trend”, and will continue to increasingly impact future investment decisions across the globe. “We know the value that investment can create for society. That’s why we seek to integrate ESG considerations into our research and overall investment decisions across investment desks and asset classes.”

Earlier this year, Schroders’ commitment to responsible investing was recognised with the highest accolade for the fifth consecutive year. The Principles for Responsible Investment (PRI), an influential United Nations-backed global investor initiative, awarded Schroders with an A+ rating for its overall strategy and governance in relation to sustainable investment.  Just 25% of investment managers globally were awarded the A+ rating.

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