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

Global climate challenges call for new strategies_website
| Inside Institutional, Sustainable Investing

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 on the 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.

 

The information in this article does not constitute financial advice.  While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSP, their shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaims all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information.

 

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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, Sanlam Capital Markets (Pty) Ltd (“SCM”), Sanlam Credit Fund Advisor Proprietary Limited, Sanlam Africa Real Estate Advisor Proprietary Limited and Sanlam Employee Benefits (“SEB”), a division of Sanlam Life Insurance Limited and Simeka Wealth (Pty) Ltd; and has the following approved Management Companies under the Collective Investment Schemes Control Act: Sanlam Collective Investments (RF) (Pty) Ltd (“SCI”) and Satrix Managers (RF) (Pty) Ltd (“Satrix”).

The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium- to long-term investments. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Managers, Sanlam Collective Investments (RF) Pty Ltd & Satrix Managers (RF) (Pty) Ltd, a registered and approved Managers in Collective Investment Schemes in Securities. Additional information of the proposed investment, including brochures, application forms and annual or quarterly reports, can be obtained from the Manager, free of charge. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of the portfolio and the investor will differ depending on the initial fees applicable, the actual investment date, and the date of reinvestment of income as well as dividend withholding tax. Forward pricing is used. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The performance of the portfolio depends on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Lump sum investment performances are quoted. The portfolio may invest in other unit trust portfolios which levy their own fees, and may result is a higher fee structure for our portfolio. All the portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No 45 of 2002 (“CISCA”). The fund may from time to time invest in foreign instruments which could be accompanied by additional risks as well as potential limitations on the availability of market information. The Manager has the right to close any portfolios to new investors to manage them more efficiently in accordance with their mandates. The portfolio management of all the portfolios is outsourced to financial services providers authorized in terms of the Financial Advisory and Intermediary Services Act, 2002. Standard Bank of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments Scheme & Standard Chartered Bank is the appointed trustee of the Satrix Managers Scheme.