Africa's first sustainable investment fund
www.fanews.co.za
18 November 2009
Sustainable Capital Ltd : info@fanews.co.za



Africa’s first sustainable investment fund was launched today by Sustainable Capital, an asset manager based in Mauritius. The Africa Sustainability Fund will focus on listed companies that derive the majority of their economic benefit, including their revenues, cash flows, net asset value, production volumes and proven reserves, from the African continent excluding South Africa. Sanlam Investments, the investment division of the Sanlam Group, provided seed capital to the fund via Sanlam Life and will offer distribution and branding support through a newly formed association with Sustainable Capital.
Kevin Macdonald, managing director of Sustainable Capital, says, “We are passionate about the impact that sustainable investment has on the operating environments of listed companies and on long-term investor returns and the fund will offer us a vehicle through which to pioneer this way of investing in Africa.”
He defined sustainable investing as the integration of environmental, social and governance factors into investment management practices with the conviction that they will have an effect on the long-term financial performance of companies and, ultimately, on shareholder value.
“A recent IFC/Mercer Report1 on the state of sustainable investing in emerging markets revealed there were no ‘sustainable investment-labelled’ funds that offer African investment opportunities. This is remarkable given that signatories of the UN Principles for Responsible Investment currently representing over 18 trillion US dollars in assets have committed to integrate environmental, social and governance factors into their investment analysis and decision-making processes,” said Macdonald.
Greg Barker, director of research at Sustainable Capital commented: “Our investment philosophy is that the sustainability performance of countries and companies is fundamentally linked to long-term investment returns, yet inefficiently priced by African financial markets. Unlike most asset managers, who focus solely on financial information in the determination of fair value, we believe that by combining rigorous fundamental investment research with detailed investigations into material sustainability factors, we can determine a better reflection of a company’s true long-term value.
“We focus on industry-specific sustainability factors that relate to a company’s core business. For example, in our view, the most material sustainability factor for a bank is the extent to which it incorporates environmental, social and governance risks (and opportunities) into its lending practices. Our analysis of a steel company would include a valuation of its socio-environmental balance sheet, including the carbon and pollution footprint of its operations. For mining companies in Africa, stakeholder capital is highly material, particularly a company’s relationship with the surrounding community and the host government, which ultimately determines the security of its licence-to-operate. By assessing, and pricing, these risks and opportunities Sustainable Capital aims to deliver higher long-term risk-adjusted returns to its investors.”
From a Sanlam Investments’ perspective, the association fits with the company’s strategy of empowering owner-managed businesses and enhancing their success by lending corporate and investment resources to support and enhance growth.
Johan van der Merwe, CEO of Sanlam Investments says there is a global shift towards sustainable investing. “Whereas previously, sustainable investing was a ‘sideline’, it is rapidly increasing in importance. The mainstream institutional marketplace is taking it more seriously, both because of a growing social consciousness and because sustainable investing has delivered some very healthy returns. Our partnership with Sustainable Capital is extremely significant to us, not only because it will contribute meaningfully to investment on the African continent, but also because it provides an exciting new avenue for us to explore.”
The Africa Sustainability Fund will be domiciled in Mauritius, listed on the Stock Exchange of Mauritius (a member of the World Federation of Stock Exchanges) and regulated by the Financial Services Commission of Mauritius and the Stock Exchange of Mauritius.