This year’s Principles for Responsible Investment in Person conference in Cape Town, South Africa, focused on two things – ESG issues and Africa.
More and more fund managers seem to have popped up this year, telling investors about the strong economics and demographics in various African countries and how the likes of Nigeria, Kenya and Mozambique are the emerging markets of the future.
Of course, there is no denying that the wind is blowing favourably in many of Africa’s economies. But European pension funds tend to worry about the risks – corruption and other ESG issues often play on the minds of investors when it comes to investing in Africa.
Take mining, for example, which has been blighted by environmental and labour rights issues, engagement with the boards of mining companies has always been top of the agenda for many responsible investors.
The circumstances for engagement could not be any more difficult than they are in South Africa now, after 46 lives were lost in the unrest at the country’s Marikana mine last year.
While mining companies encourage investors to visit sites to convince themselves of their adequate health and safety standards and the community benefits they offer, tensions still seem to be running high when it comes to workers’ wages. Throw in doubts about the government and the state’s police force and it becomes clear that pension funds have their hands full.
And this is in a country widely recognised as a leader in ESG, mainly due to its King Codes, voluntary corporate governance codes aimed at companies. The republic also has an apply-or-explain-based Code for Responsible Investing in South Africa (CRISA), which provides a best-practice governance framework for institutional investors. Also, JSE-listed companies have to produce annual reports that address ESG factors.
In spite of these initiatives and the great attendance at the Cape Town event, there have been indications that institutional investors largely ignore ESG issues, and application of the CRISA principles has been weak. Cape Town-based Kigoda Consulting has even found cases where JSE-listed companies are not in compliance with their listing requirements.
And, of course, mining company Lonmin, whose striking workers were killed at Marikana, remains part of the JSE SRI Index.