Covid-19 has sharpened investors’ focus on environmental and social issues

By Given Majola Time of article published Oct 22, 2021

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The impact of the Covid-19 global pandemic has sharpened South African investors’ focus on environmental and social issues, amid calls for greater sustainability-focused performance data, according to the Schroders Global Investor Study (GIS) 2021.

This annual survey highlights savings and investment trends based on the answers and opinions of more than 23 000 respondents globally.

Schroders South Africa Country Head, Kondi Nkosi, said the study revealed that the majority of South African investors are now placing more importance on environmental issues at 58 percent and social issues at 55 percent than before the pandemic struck.

He explained that while Covid-19 has widened the gap between the rich and the poor the world over, South Africa was already burdened by a vast economic disparity prior to the pandemic, which has since become further entrenched. “This might account for the increased focus on sustainability issues, particularly those that are social.”

The data also revealed that among those who said their interest in environmental and social issues had increased, the majority were found to be in the 51-70 years age bracket. Yet, on the contrary, it appeared that South African investors aged between 18-27 were more at ease with the prospect of embracing sustainability.

This was as 63 percent of younger respondents stated they would feel positive about moving to an entirely sustainable portfolio provided the same level of risk and diversification was maintained – compared to 58 percent within the 51-70 category.

However, Nkosi said that of almost six in 10 local investors, 56 percent believed that data that suggests sustainable investing delivers better returns would further encourage them to increase allocations.

A further 50 percent said that more information on funds aligned to their preferences would motivate them to increase their sustainable investments, while 46 percent said that regular reporting highlighting the impact of their investments would motivate them to increase allocations.

When it comes to personal motivation for moving to a more sustainable portfolio, 67 percent said that the environmental impact of investing sustainably was the most appealing factor, while 55 percent believed that sustainable investing offered scope for greater returns.

The study also revealed what controversies are likely to drive South Africans to withdraw from investments. Financial scandals were cited as the most likely, with 76 percent of local investors stating they would sell out if their investments were impacted by financial or accounting scandals. This was in line with the global consensus.

However, an interesting departure from other markets was that 67 percent of South African respondents cited a human rights scandal as a reason to withdraw their money from an investment fund if the companies associated were involved in such a controversy. This was in contrast to the global data, which records a cyber attack as the next scenario that would most likely lead to people withdrawing from their investments.

According to Nkosi, this was not particularly surprising when considering the human rights breaches of South Africa’s past, which have left citizens with a deeply ingrained sense of justice. “As sustainability moves to the fore, the 2021 GIS has highlighted that South African investors are prepared to defend these hard-won rights with their investment spend,” he said.

Meanwhile, global mining executives ranked environment, social and governance (ESG), de-carbonisation and license to operate (LTO) as the top three risks/opportunities facing their business over the next 12 months, according to the latest EY Top 10 Business Risks and Opportunities for mining and metals in 2022 report.

The study surveyed more than 200 global mining executives and shortlists the most significant risks shaping the industry.

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