By: Elize Botha, Managing Director: Old Mutual Unit Trusts.
Decision-makers need to get clear about the environmental, social and governance (ESG) issues facing their organisation, or face alienation from generation z and millennial consumers.
On 16 June, South Africa will pay tribute to the students of the 1976 Soweto Uprisings. This will be in memory of the day that thousands of young South Africans rallied to demand better quality education and, by extension, a better future. By bravely fighting for what they believed in, the determined youth of that generation grabbed the attention of many around the globe, reminding us of our inherent desire for a brighter tomorrow.
Forty-four years later, the global community is more connected than ever before, according to Elize Botha, Managing Director: Old Mutual Unit Trusts. “Today, young climate activists around the world are galvanised around the United Nations’ Sustainable Development Goals (UNSDGs) and are demanding decisive action against climate change,” says Botha.
“Young people are often disregarded as excessively idealistic, but their organising around the climate action movement proves that they do care deeply and are willing to act, suggesting to me that politicians, decision-makers and the community at large need to start paying attention.”
Young South Africans such as Ayakhe Melithafa, who was recently invited to participate in a panel at the World Economic Forum earlier this year, is joining the chorus. “Melithafa was one of 16 youngsters — including 17-year-old Swedish environmental activist and Time Person of the Year in 2019, Greta Thunberg — to file a complaint to the United Nations Committee on the Rights of the Child in protest of government inaction concerning the climate crisis,” says Botha.
“It is incredibly inspiring and heartwarming to see the likes of Melithafa looking at their local problems from a global perspective. As adults – we ought to be doing the same.”
Research shows that global warming has increased global economic inequality by way of several natural disasters. Despite historical disparities in the consumption of fossil fuels, the study indicates that populations in the poorest and most vulnerable countries will be the hardest hit by food insecurity and climate disasters such as water scarcity, wildfires and floods.
She says that even though government and the private sector are making commendable strides, they need to accelerate their efforts to focus on the environmental, social and governance (ESG) issues their companies and countries face in order to not lose out. “More leaders are commiting to building their sustainability credentials today and this may help them attract capital in the future. They need to increasingly play their part to shift the economy towards carbon neutrality, otherwise brands and markets will soon lose out,” says Botha.
Research by Morgan Stanley reveals that over the next few decades, USD 30 trillion in wealth will transfer from baby boomers to millennials. “We are already starting to see that generation z and their millennial parents think differently about how they spend, save and invest their money,” says Botha.
To illustrate, investment research company Morningstar revealed in March 2020 that 95% of millennials are interested in sustainable investment, and 90% want their investments tailored to match their values.
“ESG funds are playing an increasingly important role in delivering sustainable adjusted long-term returns for clients. This is because research show’s that companies with high ESG scores tend to outperform their conventional peers over time, says Botha.
“ESG equity Funds are proving to be remarkably resilient amid the Covid-19 pandemic threat on global growth in numerous sectors. Morningstar reported that amid the pandemic, 24 out of 26 index funds that focus on companies with the highest ESG scores had outperformed their closest conventional counterparts.”
With this in mind, this week Old Mutual launched its first actively managed ESG Equity Fund — which sits within the suite of Responsible Investing unit trusts. “Investors with a longer-term horizon, who are primarily seeking exposure to a South African General Equity Fund with a high ESG focus, will find this solution particularly attractive as it targets a significantly lower carbon footprint and a higher ESG profile relative to the benchmark,” says Botha.
This fund will complement Old Mutual’s two existing ESG unit trusts, the passively managed Old Mutual MSCI World ESG Index Feeder Fund and the Old Mutual MSCI Emerging Markets ESG Index Feeder Fund — both of which focus on investing in a future that matters.
“The power of this mounting social movement emphasises that it’s no longer an option for decision-makers to look the other way. Investors, too, would be wise not to be left behind,” Botha concludes.
“Our focus is to increasingly invest responsibly and to provide our clients with the opportinty to do the same. We are proud to celebrate the youth of today with as much vigour as we do the youth of 1976 because they are keeping us on our toes and providing necessary reminders of what is important.”