This article first appeared in the Weekend Argus on 17 February 2019
A World Bank report in 2018 found that inequality had deepened in South Africa since the start of democracy, and ranked the country the most unequal society in the world. Most of the blame for this, and most of the responsibility for fixing poverty and inequality, is laid at government’s door. But it is important for shareholders and pension fund beneficiaries to recognise the role they can play in alleviating this unsustainable situation.
Whether you are using the services of an asset manager to build an investment portfolio or are diligently contributing to a retirement annuity fund, your investments carry social and environmental costs that are shaping the country’s future.
The act of owning shares in a JSE-listed company, whether directly or via retirement savings, puts you in a position of responsibility. This responsibility must go beyond a focus on financial returns. Considering the social and environmental impacts of your investments will help to ensure that the society you retire into will be stable and sustainable. Failing to do so will not only exacerbate social disruption, inequality and environmental degradation, it will also ensure that your long-term returns are severely compromised.
If you are concerned about increasing inequality, and what that may mean for future generations, you can play an important role as a shareholder or retirement fund beneficiary in making the companies in which you are invested more responsible and accountable.
As a first step, engage with your asset manager or financial adviser on the topic of company remuneration and board diversity. Ask whether the people who run the companies in which you are invested are remunerated fairly and responsibly in the context of the overall employee remuneration at the company.
Allowing excessive executive pay and bonus packages to continue while lowest-paid workers are not earning a living wage will ensure the cycle of poverty and inequality continues.
In response to ever-increasing concerns about inequality, and the role that the investment industry can play in alleviating it, Just Share, a non-profit shareholder activism and responsible investment organisation, is convening the Investment for Inclusion Forum on March 6 in Johannesburg. The forum, featuring some of South Africa’s foremost thought leaders on responsible investment, including Nicky Newton-King (chief executive of the JSE), Sipho Pityana (president of Business Unity SA) and Andrew Canter (chief investment officer at Futuregrowth Asset Management), will feature a bold conversation about the challenges facing responsible investment in South Africa, and what we can do differently to ensure a more prosperous future.
Without pressure from their clients, asset managers will continue to pay only lip service to responsible investment. Individual investors must better understand the social and environmental costs their investments carry. Starting with scrutinising your own investment choices is the first step in changing the status quo.