Ashburton Investments, the asset management arm of the FirstRand Group, today released the findings of its new report on the priorities of South African institutional investors for impact investing.
It showed that Black Economic Empowerment (BEE) was the most widely recognised priority followed by investing to solve social and environmental problems.
The report also identified key challenges to greater acceptance of impact investing.
Heather Jackson, Head of Impact Investing at Ashburton Investments, said that 98.5% of respondents noted they expected sustainable investing to play a more important role in investing decisions in the next five years.
“As impact investors we look for opportunities to marry financial return with a measurable positive social and economic impact. Increasingly, South Africa institutional investors are recognising the importance of ways of making a contribution to grow our economy in a sustainable and more inclusive manner.”
The research was carried out by financial research firm Intellidex which surveyed 49 funds with combined assets under management (AUM) of R2.6 trillion, which is equivalent to 65% of the total R4.3 trillion AUM in the pension fund industry. It included most of the largest funds in the industry.
When asked about the most important issues that should be addressed in impact investing, 94% of respondents recognised BEE as the key factor in investment policy.
This was followed by 88% of respondents saying solving social and environmental problems was a key consideration with the same percentage saying investing in trends related to global sustainability was important. Environmental, social and corporate governance (ESG) factors were acknowledged by 86% of respondents as a consideration for investment decisions.
Encouragingly, institutional investors are not just paying lip services to these factors - they are putting money behind them too.
When asked about changes in portfolios over the last five years, 81% said they had changed their portfolios’ exposures to help solve social and environmental challenges while also taking into account ESG factors in the investment analysis process. And 69% said they had changed their portfolios to improve black economic empowerment.
“While it is inspiring to see such high levels of understanding of these factors, the report also considered the main constraints to greater acceptance and implementation of impact investing,” Jackson added.
According to the report, 72% of respondents said that lack of transparency and reported data was an impediment, while 69% cited difficulty in measurement, 52% had financial performance concerns while 33% said a lack of investment opportunities was a challenge.
“There are clearly challenges ahead but impact investing is growing in importance and influence in South Africa,” Jackson concluded.