Investors have a heart of green - and gold

Cape Town – Investing for impact is on the rise in South Africa and Nigeria, according to a barometer released by the UCT Graduate School of Business (GSB) on Tuesday.

In this story:
- AUDIO: Interview with Fin24’s Matthew le Cordeur, Dr Stephanie Giamporcaro and Dr Francois Bonnici.
- SLIDE SHOW: presentation of key findings

Dr Stephanie Giamporcaro, research director at the GSB, created the Investing for Impact (IFI) Barometer to measure the allocation by investors of capital into investments that combine financial returns and positive impact on society and the environment.

They found that 41% of the money managed by South African asset managers and private equity players was described as being committed to IFI, representing R717bn. “The question remains, what does this commitment refer to in terms of investment practices and strategies?”

“We surveyed more than 1 200 funds managed by investors in South Africa and Nigeria,” said Giamporcaro. “We are witnessing a paradigm shift in the investment industry and this momentum needs to be acknowledged.”

“Undoubtedly, IFI is winning the battle of ideas in the industry,” she said. “But, as researchers, we now have to measure and capture how it will change investment practices in the long-term, and how it will positively impact society and the environment as a whole.”

Listen:

* Browse Giamporcaro’s presentation while listening to the interview.

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Pan-African barometer

Dr Bonnici, the director of the Bertha Centre of Social Innovation and Entrepreneurship, said the 2013 barometer focused on South Africa, “but for 2014 we decided to go pan-African and include Nigeria in our scope”.

“It became clear … that Nigeria is a very dynamic lab for IFI, particularly in the private equity space,” he said. “So it was natural to include the market in our research this year.”

The barometer will expand even further to include more sub-Saharan African countries and markets in the future.

IFI markets sophisticated

In Nigeria, IFI constituted about 34% of funds managed, which represented about $2.3bn.

The private equity space was leading the IFI industry with larger proportions of IFI strategies found among these players. In South Africa, 62% of IFI funds were in private equity, almost double the 36% in asset management. In Nigeria the difference was more pronounced with 39% of IFI in private equity and 5% in asset management.

“As the IFI markets become more sophisticated, we are growing and enhancing our measurement capacities, said Giamporcaro. “It is an interesting task for academic institutions, such as the GSB and the Bertha Centre, to develop their measurement tools and further understand how IFI can positively impact the environment and society.”

Industry interest

For Principles for Responsible Investment’s (PRI) Xolisa Dhlamini, the barometer “is really important in terms of providing evidence of existing products and approaches as well as contributing to the business case behind impact investing”.

“From a PRI perspective, it’s very important because we need to have evidence from the continent as to what investors and allocators of capital are doing from an impact investing point of view.”

Investec Asset Management ESG head Malcolm Gray said the barometer put a spotlight on responsible investing. “It helps us build a case, which is very important for advocating responsible investing within the business,” he said.

“It also serves as a benchmark as it gives us ideas as to where we can grow, what we need to be looking at, as well as providing insight on what other fund managers and the industry as a whole are doing.”

- Fin24.