Engagements: Sygnia

At our first Divest Fest in Cape Town in February 2018, we wrote a joint letter to Sygnia Asset Management. This page will record our public engagement with Sygnia.

18 June 2018: FFSA requests more info from Sygnia on ESG funds

Dear Sygnia, Iain Anderson,

Thank you for responding.

We would observe that of the other areas of investor concern that you mention, and these are certainly areas of concern to us too, many tend to be addressed as a matter of course by companies that also have the foresight to take climate issues seriously.

Would the bars to creating local fossil-free funds be lowered, in your view, if there were fossil free indices for SA available on which you could base or benchmark such funds?

Do you have more detail now on the timing of the launch of the fund you mentioned?

regards,

David Le Page

16 May 2018: Sygnia’s Ian Anderson responds to our February letter

Dear Mr Tyler:

Thank you very much for the letter you sent to our CEO dated 24 February 2018, regarding fossil fuels and responsible investing.

You are correct that there are currently very few options available to South African investors wishing to invest in funds focussed on responsible investing, or funds specifically targeting / excluding fossil fuels.

There is a “responsible index” produced by the JSE called the FTSE/JSE Responsible Investments index, however, this index does invest in Sasol, which I imagine does not meet your criteria for responsible investing.  This index was initially launched in 2004 as the FTSE/JSE Socially Responsible Investment index and was changed in 2015 to the Responsible Investment index.  Some of the criteria of this index include:

·         The FTSE Russell index methodology includes an analysis of 14 themes, and 300+ indicators. On average, companies are assessed on 120 indicators.

·         88% of the JSE is analysed.

·         The company being assessed is given preliminary assessment. It allows the company to correct or to respond.

·         Assessed companies with an overall ESG score of 2.5 (out of 5) are included in the index.

·         The index is reviewed twice a year – for ratings purposes.

·         The index is market capitalization weighted.

·         There are currently about 80 constituents in the index.

·         It appears that this methodology rewards disclosure. There are no notable exclusions.

Part of the drawback to this index is that there are no exclusions, and as mentioned, a company like Sasol is well represented in the index (at a 4.7% weighting, making it the third largest share!) which goes against your desire for divestment from fossil fuel companies.

From a domestic investor perspective, the reason there are not more funds is that the South African listed market is too small to construct a fund that adequately addresses all areas of concern from an ethical, social or governance (“ESG”) investment perspective. As an example, the use of fossil fuels is important to yourself, whereas other investors have greater concerns regarding governance and company behaviour (like anti-corruption, business ethics, or tax transparency).  Other investors are more concerned with the social impact, specifically regarding privacy and data security or labour management.

At Sygnia, we too have been frustrated by this lack of opportunity, and the way we are currently addressing it is to look at international options.  This would be a fund that gives a broader and more diversified investment universe, while specifically addressing ESG issues.  To this end, we will be launching an international ETF  in either the 3rd or 4th quarter of this year that invests on specific ESG criteria.

This will be a fund available in South Africa to South African investors, that invests globally in companies that meet the ESG investment criteria.  We will be sure to send you and your group information pertaining to this launch as we grow closer to the time, and hopefully you will be pleased with the investment universe.

As further information, I have put together a few slides that give some indication of the approach Sygnia currently takes towards ESG investing.

Kind regards,

Iain Anderson

Head: Investments: Sygnia Group

Our efforts at getting a response from Sygnia from February to April

– 16 May: Another attempt at getting an answer out of Sygnia.
– 25 April: No response.
– 19 April: Sygnia advises us that Magda is out of country, and that Ian Anderson will comment on the matter in her absence. Later, that the entire executive team is out of the country.
– 18 April: David Le Page follows up again by phone. Lorna in Client Services says she will raise the matter again with Magda’s office and revert to us.
– 27 March: David Le Page follows up by phone; someone in Magda’s office says he will remind her of the email. No response.
– 5 March: David Le Page of Fossil Free SA follows up by email; no response.
– 26 Feb: Lorna at Sygnia Client Services advises Glen that they “have sent your email to Magda’s assistant for Magda’s attention”
– 24 Feb: Original letter signed by 13 people asking for responsible and fossil-free investment options and dialogue regarding the issue sent to Sygnia by Glen Tyler of 350.org.

24 February 2018: Fossil Free SA and 350 Africa supporters write to Sygnia Asset Management requesting divested funds

Dear Magda Wierzycka,

In the context of the current drought that South Africa is experiencing, directly compounded by climate change, a group of 18 people gathered today to talk about fossil fuel divestment. A serious concern raised was that there is currently no apparent option to invest in a fund that does not include fossil fuels or is clearly a “responsible investment” fund. We feel that this is an opportunity for Sygnia to lead the market and provide an opportunity for us and others to invest in a safe future for all.

There are cases where big institutions have already divested. New York announced last month that they would no longer invest the city’s employees’ pension funds in fossil fuel companies. Closer to home, the City of Cape Town committed to divest in June last year. With these and other prominent institutions divesting, the desire for investment in funds that acknowledge and address the increasing stigmatisation of the fossil fuel industry will only increase.

We would appreciate hearing from you with regards to this request and would like to engage with you about it. We hope there is interest from your side to develop this opportunity further.

We look forward to hearing from you.

Signed by 13 Fossil Free SA and 350 Africa members and supporters.