Dear responsible investor,
It is time to put your money where your mouth is.
Here is my challenge: find a company that needs to change and buy one share.
Not a sustainability darling. Not a company that already ticks all the boxes. Find the difficult one. The high emitter. The company struggling with inequality. The business whose transition plan leaves you cold.
Buy one share.
Then use it.
Ask the question. Vote. Engage. Collaborate with other investors. Hold the company to account.
Because if you are one of the 91% of South African asset owners who say you are a responsible investor, I think we should start seeing what that looks like when you actually own something.
New research commissioned by the Principles for Responsible Investment (PRI) found that 91% of South African asset owners self-identify as responsible investors. Yet 43% have no independent mechanism to assess whether their investment managers are delivering against sustainability mandates.
That gap is a problem.
For the past two decades, South Africa’s asset managers have also told us that they are responsible investors. They have policies, principles, stewardship reports and sustainability teams to prove it.
Yet when Just Share independently assessed 20 of the country’s largest asset managers against 20 standards of responsible investment, 85% scored below 25%. Four failed to meet even one of the standards. The highest score was just 30%.
We have no shortage of responsible investment commitments.
What we seem to have is a shortage of accountability for whether those commitments translate into action.
Asset owners cannot outsource accountability
Responsibility does not stop with asset managers. Asset owners cannot outsource their accountability along with their investment decisions.
One of the important messages from PRI in Person, the PRI’s annual conference, was that asset owners are not simply mandate takers. They are mandate makers. They decide what they expect from their managers, how they assess performance and whether stewardship forms part of the core investment strategy or remains an optional extra.
If managers are not delivering on sustainability commitments, asset owners need to ask why. Have they set clear expectations? Do their mandates reward effective stewardship? Do they assess whether engagement leads to change? And what happens when managers fall short?
You cannot credibly claim to be a responsible investor while leaving responsibility for delivering on that claim entirely to someone else.
This is about beneficiaries, too
Of course, pension funds are not charities. They have obligations to their beneficiaries and must manage investments to meet those obligations.
But that is not an argument for ignoring sustainability. It is an argument for taking it seriously.
Climate change, inequality and other systemic risks can affect the long-term performance of entire portfolios. Investors cannot simply sell their way out of risks that undermine the economies and markets in which they invest.
Nor can they claim to invest for the long term while rewarding managers exclusively for short-term performance. If asset owners want managers to take sustainability risks seriously, they need clear mandates, appropriate benchmarks and performance measures that recognise long-term value creation.
Responsible investment is not about choosing between beneficiaries and sustainability. It is about managing material risks in their interests.
Companies are noticing
I have spent much of this year engaging South African companies, including some of our biggest emitters.
I have heard a striking message in more than one conversation: shareholders are not asking about sustainability.
Sometimes the explanation goes further. The investors who used to ask these questions have left, I have been told. The shareholder base has changed. Investors coming in now are less concerned about sustainability.
The pressure to improve has diminished. In some cases, it has effectively disappeared.
Think about the consequence.
Investors say climate change is financially material. They say inequality poses systemic risks. They say companies need to prepare for a changing economy.
But if investors who care about these issues sell when companies perform badly, they may leave behind investors who do not care.
The company notices. And the pressure to change goes with them.
Stay in the room
Sometimes divestment is the right investment decision. But it should not be the automatic response to poor sustainability performance.
If every investor who cares about sustainability leaves, who remains? Potentially, the investors with the least interest in changing corporate behaviour.
I am not suggesting that pension funds should turn their portfolios upside down or sacrifice financial returns for activism. I am suggesting that responsible investment must include responsible ownership.
One share will not materially change your strategic asset allocation or overall returns. It will not give you control over a company.
But it can give you a reason to show up.
To ask the question. To vote. To engage. To work with other investors who share your concerns. And to keep asking when the first answer is not good enough.
South Africa’s institutional investors have significant stakes in the companies that shape our economy. They have voting rights, access to boards and executives and the ability to collaborate. Those rights create opportunities to influence corporate behaviour, but only if investors use them.
So, here’s the challenge
To the 91% of South African asset owners who say they are responsible investors:
Find a company that needs to change. Buy one share.
Buy it in the company whose climate strategy worries you. The company whose approach to inequality concerns you. The company whose transition plan falls short.
Then use that share.
Ask the question. Cast the vote. Join forces with other investors. Escalate when engagement fails. Stay in the room long enough to see whether anything changes.
You might not change the company with one share. But you can begin to close the gap between what responsible investors say they do and what they actually do.
Because responsible investment cannot simply be something we say we do. It has to be something we actually do.
If you are a responsible investor, let’s invest responsibly. And let’s do it together.
Yours, in hope,
Nicole Martens
Executive Director