Two weeks ahead of the kick-off of the Africa’s Green Economy Summit (AGES), to be held from February 21 to 23, 2024 in Cape Town, South Africa, AFRIK 21 spoke to the Head of Environmental, Social and Governance (ESG) Policy at international asset management group Sanlam Investments. In this interview, Teboho Makhabane focuses on the new financial mechanisms the continent needs to defy the climate crisis and accelerate its economic development through the lens of the green transition.
Benoit-Ivan Wansi : Could you tell us about Sanlam Investments, in particular its mission, workforce and sales figures?
Teboho Makhabane : With around R1 trillion ($52.7 billion) in assets under management across both our retail and institutional businesses, Sanlam Investments is one of South Africa’s largest black-owned, sustainability-driven asset managers. At the heart of our purpose is our journey towards long-term sustainability, for South African investors, communities and planet. Sustainability lies at the heart of our DNA; this means we invest in people and we measure our success by the positive impact we have on people, communities and planet.
What are the areas in which you invest on a daily basis and some of the clients (individuals, institutions) that you have worked with to date?
Teboho Makhabane : We leverage a breadth of expertise across active management (equities, fixed income, absolute returns and property), index tracking, alternative investments and private markets, responsible investing, multi-management, and international investments to create sustainable portfolios for our clients. Investing for impact continues to be the cornerstone of our ESG incorporation strategy. We work across both retail (intermediaries) and institutional clients (trustees and principal officers of large retirement funds and asset consultants).
The third Africa’s Green Economy Summit (AGES) is being held from 21 to 23 February 2024 in Cape Town. Why are you supporting thisevent organzed bythe giant Vuka group specialising in events ?
Teboho Makhabane : We proudly support the Africa Green Economy Summit as it bridges the global investment community with promising opportunities in Africa’s green economy sector, reflecting Sanlam Investments’ commitment to sustainability. Recognising the urgency of climate change, we believe that bringing together stakeholders and investment prospects can effect meaningful impact towards a sustainable future. We are honoured to contribute to reshaping Africa’s economic trajectory through this historic gathering of dignitaries, policymakers, and private sector advocates dedicated to unlocking Africa’s green growth potential. Together, we envision leveraging climate finance to drive Africa’s recovery and growth, catalysing transformative green economic development.
In 2023, you placed a lot of emphasis on environmental, social and governance (ESG) integration, which for you “has become an indispensable tool in the world of responsible investment”. Can you tell us something about Sanlam Investments’ ESG barometer?
Teboho Makhabane : Correct. Regarding the significance of environmental, social, and governance (ESG) integration at Sanlam Investments, it is crucial to highlight the findings from our first Sanlam ESG Barometer. This tool has underscored the tangible benefits of integrating ESG strategies into business operations, with 71% of surveyed companies reporting an improved public reputation and 59% noting better operational performance. These outcomes support the notion that ambitious ESG targets and transparent disclosures are not just ethical choices but also smart business strategies that can lead to long-term outperformance relative to peers.
At Sanlam Investments, we are deeply committed to advancing sustainable and impact investment practices. Our approach is multifaceted, aiming to foster a just energy transition, enhance corporate governance, and drive social inclusivity through active ownership and strategic engagements with portfolio companies. We believe in investing for good, without compromising on returns for our clients, and view the ESG barometer as a pivotal tool in measuring and promoting progress towards these objectives.
As you know, the world needs more funds to tackle economic and climate challenges effectively. Africa in particular. The problem is that the financial architecture of conventional donors (World Bank, IMF) is obsolete and increasingly contested. Do you think that private capital is the solution, especially, to compensate for the annual shortfall in climate financing ($213.4 billion, African Development Bank figures) that the African continent is unable to mobilise from its development partners?
Teboho Makhabane : The prolonged global market downturn has led some investors to question their commitment to environmental, social and governance goals. While short-term market volatility may tempt investors to abandon their ESG principles, it is crucial to stay focused on the long-term imperatives of addressing climate change and societal equality. By staying steadfast in our ESG commitments we can weather the present challenges while contributing to a sustainable and equitable future.
In light of trends in the US, where ESG funds have experienced consecutive quarters of outflows, some investors may be questioning the sustainability of sustainable investing. Concerns have been raised about the performance challenges faced by some ESG funds, particularly those affected by rising oil prices and energy stocks. However, it is essential to recognise that short-term fluctuations in the performance of ESG funds should not undermine the broader and more resilient trends driving the sustainable investing movement.
Environmental consciousness, social responsibility and strong corporate governance practices are important factors for investors to consider, and companies demonstrating robust ESG performance are more likely to attract capital and foster long-term value creation. It is crucial to view investment decisions through a long-term lens, especially considering the urgency of addressing climate change and societal inequalities, which pose significant risks to our future.
Contrary to this narrative, sustainable investing is not losing steam; it is, in fact, gaining momentum globally as well as here in South Africa, and in Africa. The growing list of financial firms signing up or aligning to internationally and locally recognised Principles for Responsible Investment (PRI) and Code for Responsible Investing in SA (Crisa), aimed at supporting sustainability practices, is proof of this.
As scientists repeatedly warn us about the urgent need to address climate change, these firms recognise the value of aligning their investments with sustainable practices. While there are valid concerns surrounding ESG investing, it is important to recognise the broader and more resilient trends that underpin the sustainable investing movement.
Companies that demonstrate strong ESG performance are more likely to attract capital and foster long-term value creation. Moreover, sustainable investing aligns with the growing demand for ethical and responsible business practices, positioning companies for success in a rapidly evolving global landscape.
Activist shareholders have achieved some victories, specifically advocating for wage gap and climate-related disclosures. These successes demonstrate the growing influence and demand for responsible corporate behaviour. Shareholders are demanding transparency, accountability and action on environmental and social issues, recognising that these factors can affect the long-term financial performance of companies.
Our view at Sanlam Investments — a business driven to have a fundamental effect on our country and continent by investing for purpose — is that sustainable investing will continue to thrive. Leading investors, including BlackRock and others, will maintain their commitment to ESG principles. Shareholder activism will persist, pushing companies to embrace sustainable practices. Regulatory bodies will refine and strengthen disclosure rules to foster transparency and combat greenwashing.
In addition to your private equity activities, do you have a CSR (corporate social responsibility) policy to support initiatives by civil society or governments, for example in response to the water shortage and energy crisis that has affected South Africa in recent years?
Teboho Makhabane : Yes. Together with the greater Sanlam Group, we are serious about helping South Africans become financially secure and independent, and to create their own wealth. This is evident in our R543 million ($28.5 billion) corporate social investment over the last 10 years in the education sector, enterprise and supplier development initiatives, and financial literacy and employee volunteerism.
What are your priorities in 2024 for the African continent and particularly for the rainbow nation, which is in an election year?
Teboho Makhabane : As the Head of ESG and Impact for Sanlam Investments, my primary focus for 2024 is to drive meaningful impact in areas that are critically important for South Africa – particularly in the context of climate change and, more specifically, for our young democracy which we call the Rainbow Nation. A key priority is job creation, addressing the pressing issue of high unemployment rates that significantly affect our country. Additionally, we aim to concentrate on reducing inequality, as we grapple with one of the highest inequality ratios in the world. Another area of vital importance is water security. Given the deteriorating water infrastructure across Africa, it is imperative that we take action to ensure sustainable water management and access. Through these efforts, we are committed to making a positive and lasting impact on our society and the environment, leveraging partnerships which give us greater insights into innovations such as the green hydrogen, for example.
On a personal level, which is your favourite city in South Africa and which other city (elsewhere on the continent) do you consider to be dynamic in terms of technology and well-being?
Teboho Makhabane : On a personal level, my favorite city in South Africa is Cape Town. The breathtaking beauty and the wealth of outdoor experiences it offers truly resonate with me, making it a lovely and vibrant city that I hold dear. Following closely is Kigali, Rwanda which has also captured my heart. Kigali impresses with its dynamic offerings, especially the natural beauty, complemented by the friendliness of its’ people. Both cities, each in their unique way, have left a lasting impression on me, highlighting the diverse and dynamic nature of urban life across the African continent.
Interview by Benoit-Ivan Wansi