Public Investment Corporation Brochure 2019

The Value of Environmental, Social & Governance

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The Value of Environmental, Social & Governance We sit down with Vhahangwele (Hangwi) Manavhela, Environment, Social & Governance Manager at South Africa’s largest asset management company PIC, to discuss sustainability, transparency, diversity and equality in a changing world.

WRIT TEN BY

HARRY MENE AR

PRODUCED BY

S TUART IRVING

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hahangwele Manavhela, also known as Hangwi, joined South Africa’s Public Investment Corporation (PIC) in 2014

in the role of Environmental, Social & Governance specialist for Unlisted Investment, later becoming ESG Manager. She received her Master’s Degree in Sociology from the University of Johannesburg and, prior to taking up the mantle of ESG Manager at Public Investment Corporation, worked at Tshikululu Social Investments.

“Working at the social investment company was the foundation of what later became my ESG role.

That’s how my journey began, with a very strong passion around social issues,” she explains.

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We sat down with Manavhela to find out how she has been tackling the tri-fold challenges of ESG management at South Africa’s largest asset management organisation with over US$150bn under management, and what she sees as the way forward for South Africa as a whole.

The role of an ESG officer focuses on three key areas: Environmental, which tackles how a company approaches its relationship with the natural world; Social, an expression of the way a company manages its relationships with suppliers, employees, customers and the communities whose lives it touches; and Governance, which deals with the internal controls of a business, including audits, executive remuneration, corruption and leadership diversity and equality. “My role was to kickstart

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“ You need to encourage companies to adopt the strategies where they can get those quick wins, and then turn those into long term strategies” — Vhahangwele Manavhela, Environment, Social & Governance Manager, PIC

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the ESG, to develop policies, develop systems and make sure those practices were fully integrated within the investment process. Obviously I started from a social perspective, and then learned more about the governance and environmental aspects as I went,” she explains.

“Once you start working on all of them, you start to see how integrated they are and together they drive the company towards sustainability.”

Although her educational background lies in the social aspect of the ESG role, Manavhela emphasises the governance aspect of the ESG role as a starting point for effecting positive change within the social and environmental elements. “For me, governance is the lens. Once there is good governance within the company it becomes much easier to approach, say, the environmental and social aspects.” She admits that the challenge at the heart of applying ESG within a company is measuring the impact in line with financial performance.

“For example,” she points out, “companies might not recognise the needs of their employees until they are on strike and only then will recognise the losses w w w.pi c . g ov. z a

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incurred by not having an effective

“When you see that the people within

ESG strategy that includes managing

the company have got a sense of

the interest of their employees.

ownership, that is what gives me

The company could be collapsing

satisfaction. I see people starting

because of poor governance, corruption

to enjoy the benefits of some-

or fraud, and only once it is collapsing

thing that they have never

will a lot of companies be able to see

experienced, and that is

those financial losses.”

where I take much pride

Manavhela stresses that, for her,

in the transformation of

the core of success, and where returns

South Africa. Previously in

and victories are most obvious, is the

South Africa,” she explains,

space where governance strategies

“companies were owned by

have positive social impact. “I’m

whites, but now we are working

passionate about people, valued as

towards a point where the ownership

human capital,” she declares.

is shared. There’s also new money

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“My role was to kick start the ESG, develop policies and systems, and make sure those practices were fully integrated within the investment process” — Vhahangwele Manavhela, Environment, Social & Governance Manager, PIC

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$150bn Assets under management

1911

Year founded

372

Approximate number of employees 11

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BIO

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Vhahangwele Manavhela leads a team that is responsible for due diligence, compliance, and engagement with key stakeholders on environmental, social and governance (ESG) issues within the Public Investment Corporation (PIC). PIC is wholly owned by South African government and is the largest asset manager in Africa.

Hangwi’s role evaluates potential investments for their performance prior to acquisition and also works with companies in PIC’s existing portfolio to strengthen their performance and ability to measure progress towards ESG benchmarks.

Professional Highlights • ESG Manager, Public Investment Corporation, 2014 – Present • Advisory Committee Member, UN Principles of Responsible Investing (UNPRI), 2016 – 2020 • Director & Volunteer, Samson and Naledzani Foundation, 2016 – present • Social Development Specialist, Tshikululu Social Investment 2010-2014 • Programme Manager, Care International 2004-2009 • Social Impact Assessor, Nsovo

Environmental Consultants, (Part time) Education & Professional Affiliations • M.S., Sociology (Social Impact Assessment ), University of Johannesburg, 2014 • B.A. Honours in Psychology, University of Venda, 2003 • B.A., Psychology, University of the North (Limpopo), 1995 Fellowship Interests In April to May 2018 Hangwi was part of the Eisenhower Global fellowship Programme in the United State of America. The focus of her fellowship was as follows.

• Examine frameworks for measuring the impact of ESG activities • Explore ways to make ESG integration a part of companies’ fiduciary duties • Study university-level programs around for ESG valuation and integration; develop partnerships to bring similar programs to South Africa • Explore means by which investors can drive economic sustainability in rural areas

and old money. There are very few black people in South Africa with old money. As we put our ESG policies into practice, we’ve seen a greater pool of investment opportunities arise amongst people with new money.

And that means you’re investing in people of colour and women too.”

Manavhela also emphasises the need for consumer education, twinned with added transparency on behalf of companies in order to improve and encourage sustainable practices.

“We still need a lot of education on the consumer side to understand ESG issues,” she says. “Customers can’t just look at the financial value of a product; they also need to look at the sustainability aspects. When a product is cheaper, ask yourself, why is it cheaper than the company next door? Maybe a lot of people have been exploited to make it cheaper, she continues. “Transparency is something we need to move towards.

We need to get to a point where companies disclose employee remuneration, minimum wage within the company and so on. If we move towards a point where we disclose those things, then maybe the consumer will be more aware and more alert, in terms of w w w.pi c . g ov. z a

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making a choice of where they should buy and who they should support.”

The environmental pillar of her role is, Manavhela explains, currently tied to the concept of risk management, compliance with legislation and applying best practice principles.

“South Africa is a water-scarce country.

There is no way you can look at the risk management of a company and then not be forced to identify environment as one of those risks.” Environmental regulations become part of compliance and then, she explains, “you start 14

realising that there are other things that can help me save money, like resource efficiency”. Transitioning from compliance to short-to-long-term sustainable practices is the roadmap for the Environmental element of Manavhela’s role. For companies to get of the national grid and adopt the renewable energy require a proper infrastructure and financial capital.

Although there has been a successful reduction made of average cost of electricity generated from R2.37 to .77c, the realisation of your investment is still within medium-to-long term.

ESG issues cannot be achieved over night but require medium-to-long term

“The redefining of sustainability has forced me to reconsider my current role in society and the contribution I can make to advance sustainability in a more meaningful and clearly defined way” — Vhahangwele Manavhela, Environment, Social & Governance Manager, PIC

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“ When you see that the people within the company have got a sense of ownership, that is what gives me satisfaction” — Vhahangwele Manavhela, Environment, Social & Governance Manager, PIC

under the auspices of Eisenhower Fellowship (EF) in the United States.

The purpose of her EF journey was to to determine if the US market has evolved in terms of ESG integration to a point where ESG is fully integrated into the investment process, and consequently if they are able to quantify its value as part of equity valuation. Based on the information she collected during her fellowship, Manavhela decided to pursue her aspiration of studying and is currently working on her PHD, further exploring the role and value of ESG in business.

planning. But there are quick wins

In the conclusion of her report,

as well: changing light bulbs, installing

Examining Models for Quantifying the

water meters. What you do is encourage

Contribution of ESG-Related Activities

companies to adopt the strategies where

to Financial Performance, she writes:

they can get those quick wins, and then

“I was on a mission to find both meaning

turn those into long term strategies.”

and new ways to advance sustainability

Despite all the obstacles making

in this changing world. The redefining

ESG mandatory for investors and within

of sustainability has forced me to

invested companies could be a game

reconsider my current role in the

changer for achieving sustainability.

society and the contribution I can make

The principles of responsible investment,

to advance sustainability in a more

as championed by institution like

meaningful and clearly defined way.”

UNPRI and Global Compact, are key drive to driving sustainability.

In April-May 2018 Manavhela was part of the 7 weeks global programme w w w.pi c . g ov. z a

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Public Investment Corporation Corner Aramist Avenue & Corobay Avenue Menlyn Maine Central Square Waterkloof Glen Extension 2 Pretoria, South Africa T +27 12 742 340 www.pic.gov.za