Navigating short-term challenges while upholding ESG goals

By Teboho Makhabane, Head of ESG and Impact at Sanlam Investments

Sustainable investing is not a passing trend. it is a transformative force that will shape our economy and society for the better. Its potential for financial returns and positive impact on our planet and society should not be underestimated. However, the extended global market downturn has made some investors reconsider their commitment to Environmental, Social, and Governance (ESG) goals.

Short-term market volatility might tempt investors to abandon ESG principles for quick gains, but it is essential to stay focused on addressing climate change and societal inequality in the long run. Maintaining our ESG commitments will allow us to overcome challenges while promoting sustainability and equity.

Companies with robust ESG performance are more likely to attract capital and create long-term value. Given the urgency of addressing climate change, rising youth unemployment, and societal inequalities, it’s imperative to consider investments in the long term.

Furthermore, sustainable investing aligns with the growing demand for ethical and responsible business practices, positioning companies for success in a rapidly evolving global landscape. Activist shareholders have achieved some victories, advocating for wage gap and climate-related disclosures. These successes underscore the increasing influence and demand for responsible corporate behaviour. Shareholders are calling for transparency, accountability, and action on environmental and social issues, recognising their potential to impact long-term company performance.

And contrary to the narrative of declining interest in sustainable investing, it is still gaining momentum globally and in South Africa. The increasing number of financial companies endorsing internationally and locally-recognised Principles for Responsible investment (PRI) and the Code for Responsible Investing in South Africa (CRISA) attests to this trend.

Given the country’s unique environmental and social challenges, sustainable investing is crucial in South Africa. From renewable energy projects to addressing socioeconomic disparities, sustainable investing has the potential to drive positive change while delivering attractive returns for investors. the demand for responsible investment options is growing among South African investors, reflecting broader shifts in societal values and expectations.

In the local context, excluding specific shares from portfolios may not always be feasible, especially in the current climate. Active ownership and stewardship during asset manager engagements with listed companies are essential. Investors can make a meaningful impact without complete divestment by offering guidance to businesses, including those in the oil industry, on best practices in environmental, social, and governance (ESG) standards. this approach can generate economic and social effects, enabling investors to navigate the complexities of the South African market while driving positive change and promoting responsible investing.

At Sanlam Investments, we believe that sustainable investing will continue to thrive. Leading investors, including BlackRock, will maintain their commitment to ESG principles. Shareholder activism will persist, pressuring companies to embrace sustainable practices. Regulatory bodies will refine and strengthen disclosure rules to enhance transparency and counter greenwashing. while challenges may arise, the core principles of sustainable investing are here to stay.