C O L L E C T I V E Special report

Collective Insight is a collaborative initiative published quarterly by the Financial Mail

The articles included here were selected by an independent Advisory Commi ee to reflect some of the best insights from investment professionals, practitioners, and academics in relation to selected financial challenges

Collective Insight enjoys the support of the Gordon Institute of Business Science’s Responsible Finance Initiative, the CFA Society of South Africa, the Financial Planning Institute, ABSIP and the Actuarial Society of South Africa

Our vision was to create a journal that SA’s broader investment community and its stakeholders could collectively “own”, carrying content totally independent of commercial interests

For inquiries contact Anne Cabot-Alletzhauser on cabota@gibs co za

Convener:

Anne Cabot-Alletzhauser

Practice director of the Gordon Institute of Business Responsible Finance Initiative

Editorial advisory commi ee:

Simon Dagut

Executive in the office of the chief executive officer, Standard Bank SA

Kelly de Kock

Chief operating officer at Old Mutual Trust Company

Prof Evan Gilbert

Associate professor at Stellenbosch University and strategist at Momentum Investments

Amanda Khoza

Vice-president and board member of the Institute of Retirement Funds SA

Caretha Laubscher

Manager: Consumer Education Framework, Financial Sector Conduct Authority

Lelane Bezuidenhout

CEO Financial Planning Institute of Southern Africa

Nici McDonald

HOD: Certification and Standards, Financial Planning Institute of Southern Africa

Darius van der Walt

Member of the ASSA investment commi ee, head of product development at M&G Investments

Southern Africa

Nerina Visser, CFA

ETF strategist and financial adviser etfSA

Langa Madonko

Principal for investor relations and capital raising at Summit Africa

ARE WE THERE YET?

By and large the corporate and investment world has capitulated

We can no longer assess the viability and sustainability of a business without considering how society, the environment and the regulatory or governance world affect a business or, in turn, are affected by a business’ s products and processes

Over the past few years there has been a flurry of activity from regulators, industry bodies and service providers, all trying to determine exactly how this should be done: what should be measured, how does it get measured and what constitutes good, or at least adequate, in terms of how a company is addressing its ESG obligations.

It’ s been tough going, and certainly not without controversy This edition of Collective Insight focuses on the “S” in ESG Of the three components of ESG, societal impact has received the least attention probably because this aspect is perhaps the most challenging to delineate and the most emotionally charged

To get a feel for what we need to grapple with, let me pose a few questions What exactly does business aim to achieve by getting involved in the “S” in ESG? Surely

Who is the there are potential conflicts between the needs of society, which cannot be commercially driven, and the needs of businesses, which have to remain financially viable? Is this just a branding exercise, or an attempt by business to obtain “social licence” from the communities they serve? Or is there some tangible financial reward that we need to understand better?

The articles in this edition cover a number of the areas for debate

In our article “ESG in Africa” , about the lessons that can be learnt from nations that placed the “S” above the “E” and “G” , Manka Sebastian shares how other countries have yielded direct and enhanced productivity from prioritising the “S” and how, through doing the right thing, a focus on developing social capital is fundamental to any country’ s productivity and growth rates

What happens when the government does not fulfil that need? This is the conundrum that David Crosoer addresses Importantly, he questions how “fit for purpose ” the corporate and investment world is for filling in the gap when the government fails Noma Nyembo follows on with an article on “social licence” and why this is something businesses need to both earn and renew from the communities they serve Michael Judin and Alexandra Russell provide some solid evidence of how “social licence” can be emphatically

achieved in the South African context

Regarding more hard-core financial issues, Michael Rea provides two case studies in which paying attention to the “S” data translated into significant improvements for corporate productivity and efficiency Natalie Anderson, in turn, guides us through the process of how to integrate societal factors into an investment valuation process

Kasief Isaacs provides us with an article (in the digital edition) that highlights how investment options in which the public and private sectors collaborate provide the optimal way of ensuring that public interests are served when the project is managed as a public-private partnership

In many ways, this public-private partnership concept would seem to be an ideal approach

Our final article uses the renewable energy independent producer procurement programme as a case in point, and asks whether this could be the type of approach South Africa can use to secure its just energy transition

What actually needs to be considered to make sure it doesn’t fall short? How and when will we know whether any of these societal interventions by business are going to add value and relieve some of South Africa’ s pressure points?

Our hope is that this edition of Collective Insight will ignite curiosity and fuel conversations that may not necessarily bring us answers now, but will cast some light on the next steps x

David Crosoer