Kerrin Land, CEO of Old Mutual Wealth, gives her views on the shifting wealth landscape and the impact of responsible investment and sustainability themes.
Q: HOW DOES OLD MUTUAL WEALTH ALIGN ITSELF WITH THE LONG-TERM SUSTAINABILITY AGENDA OF RESPONSIBLE INVESTING?
A: At Old Mutual Wealth, we believe true wealth is about more than just how much money you have. It is about being able to live the life you want. Wealth presents choices – be it sailing around the world or changing it. Our advice-led philosophy is centred on you and your unique goals.
Understanding our clients’ goals requires personal conversations and insights that will determine the most appropriate investment strategies over the short and long term. We partner with our clients to co-create holistic solutions that consider wealth in its broadest sense. For some clients this may mean more deeply exploring their personal beliefs around sustainability issues and then seeking alignment with their long-term wealth goals and plan.
Q: WHAT SHOULD INVESTORS BE CONSIDERING IN RESPECT OF RESPONSIBLE INVESTMENT ISSUES?
A: At its core, responsible investment means considering material environmental, social and governance (ESG) issues in the investment and ownership decision-making process.
Given that many sustainability or ESG themes are long-term in nature, there is a natural alignment with the planning horizon for most long-term investors. We understand that ESG issues can have material impact on both the short- and long-term returns of companies – investors will know that poor governance, labour disruptions and drought issues, to name just a few ESG issues, have all touched the markets both domestically and globally in the past 12 months. With this in mind, we see the application of responsible investment practises by asset managers as simply part of their fiduciary requirements and a sign of best practice.
We are one of the largest asset managers in South Africa and, as a result, the custodian of sizable assets. We can – and have previously – wielded significant influence when deciding how to invest both for investment return and maximum societal impact. We remain committed to growing the wealth of our customers by delivering market-beating returns in a responsible and sustainable manner.
Q: WHAT RESPONSIBLE INVESTMENT OPPORTUNITIES ARE THERE FOR SOUTH AFRICAN INVESTORS?
A: It’s important to make a distinction between cross-cutting responsible investment practises undertaken by investment managers and thematically-styled investment products that offer exposure to long-term sustainability growth themes. Given the size and structure of our domestic market, we see that gaining exposure to a core sustainability growth theme is best accessed through the private and unlisted markets. Getting exposure to these growth themes through focused international equity funds is possible.
However, given their narrow focus, they are often not the optimal solutions for the average private investor. Perhaps what is more promising for investors looking for general equity exposure is the growing suite of ESG index funds. These ESG index funds are typically designed to have a low tracking error to a parent benchmark (for example, MSCI World) and so offer a “free option” on the long-term mispricing of ESG risk. This is effectively offering investors the opportunity to generate market-like returns, while holding a basket of companies that are measurably better than their peers on an ESG ratings basis.