Global climate challenges call for new strategies: the rise of sustainable investments

The devastating impact of climate events like floods calls for investors to support sustainable investment solutions, writes Teboho Makhabane, Head of ESG and Impact at Sanlam Investments

As the world grapples with a multitude of climate challenges – including devastating natural disasters like the recent floods in KwaZulu-Natal and the Western Cape, and globally, in Saudi Arabia, heatwaves in Brazil and Southeast Asia – global market sentiments are undergoing a profound shift towards sustainable investment solutions.

The death toll from these catastrophic events mounts, highlighting the urgency of addressing environmental, social, and governance (ESG) issues. Climate change is disrupting nature and affecting the quality of life of the globe’s most vulnerable people across Africa, Asia and small island states.

In the wake of these disasters, the imperative for sustainable investment practices becomes more evident. The Intergovernmental Panel on Climate Change (IPCC), which is part of the United Nations, estimates climate investment is about US$600 billion per annum. It has to increase up to six-fold to tackle what needs to be done. Fortunately, sustainable investment strategies, which aim to deliver financial returns and address pressing ESG concerns, are gaining momentum worldwide. Historically, sustainable investment practices can be traced back to events such as the Quakers’ denouncement of slavery in 1750 and the divestment from South Africa during the apartheid era, highlighting early examples of ethical investment decisions.

At Sanlam Investments, sustainable investing lies at the heart of our approach. We integrate ESG considerations into all our investment decisions as part of our fiduciary duty, actively contributing to positive change and sustainability. By leveraging science-based targets and diverse expertise, we aim to shift market perceptions from viewing ESG as a risk to an opportunity that generates sustainable returns for investors and society alike.

Traditionally, markets have prioritised financial returns without fully accounting for environmental and social externalities. However, with the increasing magnitude and frequency of global environmental and social challenges, markets are recognising that ESG issues pose significant financial risks. This paradigm shift is driving investors to demand greater consideration and disclosure of material ESG risks, challenging the norm and reshaping investment strategies.

Although the perception of sustainable investments has been negative in the US, there has been a notable increase in such investments in non-US markets, reflecting a broader global trend towards sustainable finance. Morgan Stanley’s Institute for Sustainable Investing reports that more than three-quarters of global investors are now seeking sustainable investment products, indicating a growing appetite for responsible investing.

As the demand for sustainable investments continues to rise, there is a pressing need for robust regulatory frameworks to combat greenwashing and ensure transparency. Initiatives such as the United Nations Sustainable Development Goals (UN SDGs), Principles for Responsible Investment (UNPRI), and efforts to align with international standards demonstrate a commitment to responsible investing practices.

Disclaimer

Sanlam Investments consists of the following authorised Financial Services Providers: Sanlam Investment Management (Pty) Ltd (“SIM”), Sanlam Multi Manager International (Pty) Ltd (“SMMI”), Satrix Managers (RF) (Pty) Ltd, Graviton Wealth Management (Pty) Ltd (“GWM”), Graviton Financial Partners (Pty) Ltd (“GFP”), Satrix Investments (Pty) Ltd, Amplify Investment Partners (Pty) Ltd (“Amplify”), Sanlam Africa Real Estate Advisor Pty Ltd (“SAREA”), Simeka Wealth (Pty) Ltd and Absa Alternative Asset Management (Pty) Ltd (“AAM”); and has the following approved Management Companies under the Collective Investment Schemes Control Act: Sanlam Collective Investments (RF) (Pty) Ltd (“SCI”), Satrix Managers (RF) (Pty) Ltd (“Satrix”) and Absa Fund Managers (RF) (Pty) Ltd. Sanlam is a full member of ASISA. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments/collective investment units/unit trusts may go down as well as up.

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