Estate Living Magazine Connection - Issue 43 July 2019 | Page 57

L I V E
S M A R T
(JSE) that rank companies based on their ESG commitments. These
indexes were created in 2016, and include a market-cap weighted
index as well as a Top 30 equally weighted index. The ESG ranking is
calculated across many factors and supplied by FTSE Russell, the global
index provider.
The ESG ranking may not be a perfect indication of how sustainable
or eco-friendly a business is, but it is a fair and comparable ranking that
is developing over time. Investing in companies committed to ESG
practices shows some specific measurable characteristics such as
lower cost of capital, better resource efficiency, lower staff turnover and
stronger innovation, all of which can influence competitive advantage
and long-term performance.
Old Mutual is currently the only local company offering ESG-based
products with an Emerging Markets ESG index tracker as well as a
World ESG tracker. There aren’t any local ETFs that follow the ESG
index yet, and there is debate in the industry as to whether ESG should
be a stand-alone product or not. All companies should be focused on
ESG practices, but we do obviously see some who put in far greater
effort, focus and money.
Going forward we should see a heightened interest in ESG investing
as fund managers create dynamic offerings for investors who are
demanding more options for sustainable investing.
Bottom line
As consumers demand that businesses change their practices, we
should reward those companies by investing in their cause. Applying
ESG principles will become more important when considering where
to invest; it’s a new way of thinking whereby you not only look at a
company’s financial performance but rather take a far more holistic
view of what the company is doing, and how it plans to survive the
changing world.
Looking at individual companies, it’s hard to gauge their commitment
to sustainability, and to know how far down the road they are in terms
of capital investments for greener production. However, there are two
Responsible Investment Indexes on the Johannesburg Stock Exchange Looking at your next investment, consider the environmental, social
and governance practices of the companies in which you plan to put
your money.
Brendon Dale
N
As expected, individual investors are attracted to companies
that incorporate environmentally sustainable practices and social
responsibility, and practise good governance. These can be grouped
under the abbreviation ESG, and we’re seeing a global trend toward
ESG investing. South Africa may still be in its early days but, globally, it’s
estimated that ESG investing has more than $23 trillion in assets under
management – around a quarter of all professionally managed assets
around the world. 
for the environment, the community and staff, and sometimes doing
things that don’t make business sense based on just the numbers. The
ultimate driver, however, is the ability of the business to continue for
years to come – in other words, sustainability.
How to invest in sustainable business ESG-based investing is still very new in South Africa, and there is a
perception among some investors that ESG investments offer inferior
performance due to higher capital outlay and lower profits. This is not the
case, though, as ESG investments have repeatedly demonstrated that
capital employed sustainably can not only meet, but often outperform
investors’ return expectations. We may not have much local historic
data yet, but ESG index funds are designed to offer returns in line with
market performance, while offering clients exposure to companies that
are not only measurably better for the planet but also sustainable for the
long term.
Shanghai