Climate activist group launches ethical investment guide
On 2 October, Fossil Free South Africa (FFSA) launched the latest edition of the Planet A Investment Guide, our advisory on ethical and sustainable investment in South Africa and, as far as we are aware, the only such guide of its kind in South Africa.
The event was held at the Biscuit Mill in Woodstock and was attended by about 40 people.
“People often say to us, ‘It’s all very well to campaign for people and institutions to divest from fossil fuels, but what are the alternatives?’” said FFSA director David Le Page. “The guide is our answer to this question.”
After extensive research, the experienced journalists who wrote the guide concluded that, though there are many fossil-free options offshore, there are only three funds based on South African assets that can be recommended as substantially more sustainable than their peers.
Representatives of these three funds, who were special guests, described them at the launch. They were Traci Porter for the Select BCI ESG Equity fund; Waleed Hendricks (Old Mutual ESG Equity Fund), Preanka Naidoo (Sanlam Living Planet Fund) and Cerin Maduray of WWF, which founded the Living Planet fund and still helps run it.
“While FFSA recommends the funds in our guide over others, we urge people who consult our guide to seek expert advice in making investment decisions,” said Le Page.
“We are an activist organisation and can assess funds’ ethical credentials to the best of our ability, but we cannot assess which funds are best suited to your particular needs.”
The event began with an eight-minute video presented by renowned earth scientist Johan Rockström of the Potsdam Climate Institute, on how humanity is overstepping critical important “planetary boundaries”, largely via carbon emissions and other forms of pollution from the fossil fuel industry.
ESG-style investing usually outperforms conventional funds
Key points raised included how ESG (environmental, social and governance) funds almost invariably outperform traditional funds over time, although many financial advisors’ still do not believe or realise this. A recent study from NMG Consulting that Naidoo described found that almost one-third of financial advisors believed an ESG emphasis in investment management eroded returns; almost 45% said it had no impact, and only the remaining 20% understood that it usually improves returns. There was a reasonable consensus that there is a very poor understanding among citizen investors about how climate change is eroding their investments and stands to do so increasingly in the future. Financial advisors need help and training on the importance of ESG and ethical funds and on how they can benefit their clients.
Preserving intergenerational wealth is another key rationale for ESG-style investments − a rationale that financial advisers should be raising in discussions with their clients, said Le Page. More than US$80 trillion is expected to flow globally from baby boomers to the millennial generation, for whom social investing is key. But much of that could be eroded by climate damage to the global economy and stranded fossil fuel assets. Public understanding of these dangers could accelerate more ethical investment.
Maduray made the point that strengthening “polluter pays” policies would increase the incentives for asset managers to decarbonise, but these are currently not well implemented in South Africa: for example, Sasol has been repeatedly allowed by the government to breach air quality standards, and the implementation of the carbon tax, though welcome, has been watered down immensely to benefit big polluters.
None of the three South African funds listed in the guide invest in Sasol and are all performing well.
“FFSA believes that in general, South African asset managers should be doing far more than they are to help curb climate breakdown, through offering more climate-friendly funds, lobbying government for stronger climate action and better educating their retail clients,” said Le Page.
“However, we also realise that ESG can never be a fully adequate substitute for the principled and science-based regulatory leadership on climate that we should be getting from governments – but are not.”
A handbook introducing the guide can be accessed on https://bit.ly/4eg9CAO, find the full online guide on https://bit.ly/3BbKuMX. More information is available on this page our our website: https://www.fossilfreesa.org.za/planet-a-investment-guide
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