SANLAM INVESTMENTS: ON A MISSION TO BECOME AFRICA’S PRE-EMINENT SUSTAINABLE AND IMPACT INVESTOR

As one of the largest fund managers on the African continent, Sanlam Investments works in partnership with listed companies as an investor to drive ESG commitment and action. We aim to help spur increased focus and impetus for these businesses to implement sustained and measurable ESG strategies and activities.

The first Sanlam ESG Barometer has given us excellent reasons for all listed companies to make integrating ESG in their strategy a considerable focus – with 71% of companies reporting an improved public reputation and 59% having experienced better operational performance since they implemented an ESG strategy.

Globally, we’ve seen that companies with ambitious ESG targets and better disclosures tend to outperform their peers over the long-term. We hope these positive outcomes mean that more and more companies will follow suit.

For companies to stand out as ESG leaders and change-makers, the focus must be on addressing all three aspects – the E, the S, and the G. We’re seeing, time and again, that investors want to move their money to companies that create positive and sustainable impacts on these three elements. Now more than ever, we must step up our effort and focus on measurable and visible sustainable impact outcomes.

Here are some mechanisms for companies to consider when integrating and implementing their ESG strategies:

It starts with a plan: know your ‘why’ and what success should look like.

Leaders in the corporate sector are distinguished by a clear ESG strategy which guides their approach to ESG risks and opportunities. In the same way, a move to carbon neutrality starts with a clear climate policy and a climate roadmap with timelines supported by a strong employee and external stakeholder engagement.

Embrace the essence of ESG.

To be an ESG leader, a company needs to move beyond compliance and rather approach ESG as an opportunity to innovate and contribute to organisational growth, build a solid brand and reputation, and attain high employee retention and customer engagement.

It is thus important that companies consider the quality of their ESG activities in order to stand out as being additional or adding new value to ESG KPIs.

For example, on issues of diversity and inclusion, a diverse workforce is important across all levels of the business, however, the quality of inclusion is an important consideration that goes beyond a company being diverse. Current ESG KPIs on diversity and inclusion focus on a quantitative value (number of female directors, number of black people in management, etc.) and rather than on the quality of integration and power given to minority groups.

There remains an untapped additionality opportunity when measuring the quality of ESG KPIs that quantify a company’s commitment to ESG. Introducing this new lens of quality to ESG measurement will drive better outcomes that can actually enhance societal and environmental change.

Support the “Just Energy Transition”: Financing bold green energy solutions is a must.

The onset of the border carbon tax in European markets may result in many South African-produced products attracting high carbon border taxes, making them uncompetitive. Companies should start thinking of carbon in monetary terms rather than just tons. Thus, directing research and development budgets towards research on innovations that address low-carbon or alternative energy solutions for the business is a critical part of an ESG strategy.

Corporations can use their CSI budgets to fund early-stage innovations around climate financing, investing in dynamic clean energy solutions, which they can test in parts of their business. An example is the green hydrogen value chain which the government has recognised as a key driver of economic growth and decarbonising the South African electricity grid.

Additionally, looking through the just transition lens, CSI budgets could be directed to provide poorer households with sustainable, green energy solutions, in the process reducing emissions and promoting access to a reliable and green energy source.

Overall, the interplay between environmental, social and governance issues is essential in devising innovative approaches to being greener. Pope Francis stated, “We are faced not with two separate crises, one environmental and the other social, but rather with one complex crisis which is both social and environmental.” Strategies for a solution demand an integrated approach to combating poverty, restoring dignity to the excluded, and at the same time, protecting nature.

As Sanlam Investments, we recognise the vital importance of ESG and commit to using our influence to ensure lasting social returns for our nation. The Sanlam ESG barometer is a robust engagement tool to gauge where SA Inc. is at and highlight the work that we must collectively do to empower all South Africans to live meaningfully in a country that feels inclusive and opportunity rich.

SANLAM INVESTMENTS: STEPPING UP THROUGH ACTIVE OWNERSHIP.

As part of the larger Sanlam Group, Sanlam Investments is committed to promoting conscious and sustainable investing practices and prioritising impact. A few years ago, we set out on a mission to transform our business into one guided by purpose, focusing on sustainable and impactful investments. By fully embracing this principle, we strive to create a future where individuals can thrive in communities full of opportunities and hope. We believe that this vision will leave behind a legacy of prosperity.

We’ve invested heavily in our sustainable investment capabilities and expertise to lead by example. Proxy voting and investor engagements are powerful means to demonstrate our preferences and expectations regarding governance and sustainability themes for portfolio companies. It’s a journey we’re proud to be on.

Active shareholding is a crucial aspect of our ESG framework and a chance to influence a portfolio company. We adhere to strict guidelines to vote on company resolutions on behalf of our clients in accordance with the SA Companies Act and JSE Listing requirements.

In 2022, Sanlam Investment and our partner Robeco facilitated 22 in-house and 206 engagements respectively. We voted on about 3 454 resolutions, 352 (10%) of which we voted against, primarily due to remuneration practices (40%), director re-election/ appointment (34%) and access to capital (18%).