Learnings from our impact journey

Learnings from our impact journey with Robeco

In the lead-up to the UN’s Climate Change Conference (COP26) in Glasgow on 31 October, Sanlam Investments hosted a virtual impact investing client engagement webinar on 26 October, exactly a year since announcing its new partnership with Robeco, the world’s leading sustainable investing practitioners. The guest speaker for the morning was Carola van Lamoen, head of Sustainable Investing at Robeco.

At this event, Nersan Naidoo, CEO of Sanlam Investments, said that clients were genuinely committed to achieving sustainability outcomes. “Whether it’s climate issues, biodiversity erosion or social issues, our shared challenges are getting exponentially bigger. This means environmental, social, governance-led and impact investing initiatives are not fads. People are increasingly concerned about where their money is going.”

Jason Liddle, head of Distribution at Sanlam Investments, said, “Investing for impact means addressing real problems. We know investors are looking for ways to make robust returns while driving their capital to target society’s most pressing problems. Impact investing achieves both.”

Providing investors with impactful options

Liddle said that it was pivotal to give investors relevant ways to be intentional with their money, that make sense in the country’s context. In South Africa, job creation is continuously top of mind, especially after Covid-19. To this end, Sanlam allocated R2.25 billion of its capital into creating three Investors’ Legacy Funds, which aimed to create and preserve jobs by offering finance for the companies that needed it most.

“Using debt and equity financing, we provide these businesses with the platforms and expertise to grow and employ more people. Our aim is to create and preserve 27 000 jobs. Our SME debt fund has also done phenomenally well by raising another R750 million rand that’ll additionally be channelled into business support and community upliftment projects.”

This range of impact-first funds make it simple for investors to diversify a portfolio, receive robust returns and make a measurable social impact. It has saved and created an estimated 3 000 jobs to date.

Measuring impact

Carola van Lamoen, head of Sustainable Investing at Robeco, said that investors faced a data dilemma, “If you want to measure your impact it is key to get the right data, but is it available? Is it correct? How can you translate it to specific funds? It is technical and difficult and the data quality isn’t perfect yet. Then, of course, it’s a question of what to do with the data. How are you going to steer your portfolios and move away from or engage with the most carbon intensive companies to transition to a lower carbon portfolio?”

Sanlam has embedded a solid impact-first framework across its investment processes, so impact can be clearly measured and tracked against defined objectives. Liddle reported, “Our governance framework aligns with the sustainable development goals. These establish a clear standard for measurement. Our investors can see the specific challenges we’re trying to address and our roadmap to reach these goals. We’re also completely transparent about the progress we’re making.”

Investors have a big role to play

Van Lamoen said that governments and companies do respond to investors – investors can change the narrative. In terms of moving the dial, she suggested that investors collaborate and actively engage with companies. “For example, investor pressure is a huge driver in the race to net zero. The Climate Action 100+ initiative is a powerful example of this. It has helped prompt two thirds of the world’s heaviest emitters to set a net-zero target.”

In a South African context, supporting specific funds can make a massive difference. For example, approximately 33 black, women-owned and other SMEs have benefitted from Sanlam’s SME Debt Fund and the SRI-focused Resilient Impact fund to date. Says Vukile Themba-Mketo, portfolio manager for the Investors’ Legacy SME Debt fund, “SMEs are typically considered to be the cornerstone of the country’s economy. Their health matters. After Covid-19, focusing on this sector’s recovery will have a profound and positive knock-on effect for South Africa’s GDP”.

One of the specific SMEs that the Sanlam SME fund assisted was Oasis Water, which creates safe and hygienic drinking water.  Oasis also invests in township economies as well as vulnerable communities, such as Mabopane, which had no clean drinking water as a result of severe drought in the area.   Oasis now has over 1 500 employees and 77 new retail outlets. Yet another SME that received funding is niche agriculture finance company, Capital Harvest, which provides financing to agricultural projects. Then there’s also a sustainable business for renewable energy assets called Energy Partners, which the team granted funding to. Mettle is another SME which is itself a micro-finance operation which supports smaller businesses, such as panelbeaters, which suffered during the pandemic due to the sustained lockdown.

Liddle concluded that, “Creating wealth and wellbeing by doing good and targeting good returns do not have to be mutually exclusive goals. Robeco’s research shows how powerful investors’ voices can be. It is imperative that asset managers become responsible stewards who provide meaningful options for investors to put their financial weight behind causes they care about.

“Our clients want to drive change. It’s our responsibility to help them achieve this and to be part of the solution as well.”