Institutional investors must play their part in driving real world decarbonisation

By Nicole Martens, Head of Stewardship at Old Mutual Investment Group

The slow progress made by countries towards their net-zero carbon emissions targets has left us questioning government and private sector commitments to combating climate change.

However, at COP26 and COP27, we finally saw a shift from talk to action. The world finally realised that the climate emergency is no longer in the distant future – it is already here, as evidenced by the increasing frequency and severity of extreme weather events. The building blocks needed to address climate-related challenges at scale have taken time to develop amidst a collective sense that we are living through an era that offers us our last chance to change the course of the climate crisis.

South Africa is under tremendous pressure globally to make our just energy transition work. We are seen as a pilot for other emerging market transitions. If we fail, we could be robbing other countries in Africa of their opportunity, with international financiers unlikely to commit to mega projects elsewhere if they cannot get things working in one of Africa’s most advanced economies.

The just energy transition’s success hinges on all South African stakeholders playing their part in the overarching plan – to show the world what is possible. All South African institutional investors are universal owners of SA Inc – each of us owns a little bit of everything. When SA Inc does well, we all do well. If SA Inc suffers, we all suffer.

As such, capital markets have a critical role to play in supporting the drive towards the achievement of a just transition to a more sustainable and inclusive economy. The JSE has made significant advances in listed company disclosure requirements and reporting frameworks to encourage transparency. Science-based measures for decarbonisation make it easier for investors to track progress on ESG factors and effect behavioural change in investee companies through solutions-focused stewardship.

Old Mutual Investment Group (OMIG) has witnessed a rapid acceleration of climate-related initiatives by listed companies over the past decade in response to unprecedented pressure from customers, government, regulators, and shareholders (including ourselves) to do better when it comes to the environment and society. For OMIG, it is now expected that listed companies should have in place and disclose their plans to transition and commit to regular communication of progress made on emissions reduction, net job creation and socioeconomic impact assessment.

We need to be working toward economic decarbonisation, not just portfolio decarbonisation. To have a real impact, investors must engage with the companies in which they invest to ensure they have plans to reduce their carbon dependencies over time – while keeping an eye on transition strategies on things like poverty, unemployment and inequality.

There are some unique challenges to listed equity stewardship in South Africa with its relatively small financial market and an even smaller universe of investible listed equities. Further complicating matters, the Capped SWIX benchmark is far from aligned with the national net-zero target.

OMIG is doing its part to address this constraint by building a local (South African) net-zero benchmark, which will be launching early in 2023. This will allow us to use capital allocation to incentivise change.

As stewards of our clients’ capital, we are responsible for guiding companies as they transition to net zero carbon emissions, helping them to identify and mitigate risk, and take advantage of opportunities.

How CFOs can empower their Corporate Governance using data analytics with Caseware IDEA®

Share this articleCaseware IDEA® empowers organisations with robust data analytics capabilities. In this piece we explore five key areas companies can leverage Caseware IDEA® to enhance governance frameworks. By Christiaan Steyn, Product Manager: Assurance & Analytics, Caseware Africa In today’s rapidly evolving business landscape, the effective utilisation of data analytics has become paramount for companies …

How CFOs can empower their Corporate Governance using data analytics with Caseware IDEA® Read More »

Read Full Article

Exploring the Cutting-Edge Technology of DataDot Microdots

Share this articleSince 2001, DataDot Technology SA has been a trailblazer in the field of asset marking and vehicle identification in South Africa. With the remarkable accomplishment of marking over 6.2 million vehicles on the country’s roads, DataDot has played a pivotal role in enabling the identification of recovered, cloned, or stolen/hi-jacked vehicles. The use …

Exploring the Cutting-Edge Technology of DataDot Microdots Read More »

Read Full Article

The Law of Extraction – Investing South Africa’s Critical Minerals Potential

Share this articleSouth Africa’s critical minerals (CRMs) industry stands at the intersection of immense potential and significant challenges. The surge in demand for CRMs in South Africa and across the African continent has been driven by factors such as the rise of electric vehicles, renewable energy adoption, and technological advancements. Despite the abundance of CRMs …

The Law of Extraction – Investing South Africa’s Critical Minerals Potential Read More »

Read Full Article

Technology Innovation vs. ROI: Striking the Business Balance

Share this articleIn today’s fast-paced digital world, technological advancements have revolutionised business operations, prompting enterprise businesses to embrace digital transformation at an unparalleled pace. Businesses face the dual challenge of seamlessly integrating technology while needing to showcase tangible Return on Investment (ROI). Steven Sutherland, Divisional Executive of Adapt IT Telecoms, sheds light on the need …

Technology Innovation vs. ROI: Striking the Business Balance Read More »

Read Full Article