Sometimes, I can’t help but wonder if there’s a disconnect between our values and our money. I’m a senior lecturer at the UCT Graduate School of Business. Every year when the time comes to review my retirement fund, I wonder why, despite the fact that I’m currently working for one of the most dynamic and enlightened educational institutions on the continent, I’m not offered the option of aligning my retirement investment choices with my personal and professional values around social and environmental responsibility.
Today, most of us have no clue if our money is being invested in the shares of companies that are engaging in blatantly unethical behaviour. Nor do we know if it’s going into businesses that we think could make a big difference for the future of the country – think affordable transport, housing, health and education solutions; think energy saving and renewable alternatives to petrol and coal; think financial support for small entrepreneurs and small businesses; you get the idea, think positive social and environmental change.
Over the years, I’ve discovered through my academic work that many investment professionals believe the average South African investor does not know what Sustainable and Responsible Investing (SRI) is, and therefore think it would be a lost cause to develop and market such products in this space.
I’ve always disagreed with this pessimistic industry-wide perception. But I did not, until recently, have the solid facts with which to challenge it.
What do people really want to see their money achieve?
In 2011 I discovered some stimulating research led by Suzette Viviers, Professor of Finance at Stellenbosch University. It demonstrates that, if asked directly, final beneficiaries of retirement funds do indeed care about having environmental, social and governance factors considered in the investment decisions taken on their behalf by investment professionals.
That same year, I was involved in a research project that surveyed the final beneficiaries and trustees of a big multinational, which led to similar findings. When introduced to the concept of SRI and asked their opinion, respondents voiced a genuine interest in having SRI investment options made available to them. Then, in 2012, we conducted a pilot survey at the UCT Graduate School of Business (GSB) to gain some insight into how University of Cape Town (UCT) employees feel about SRI. We figured that surveying the GSB would serve as a good indicator given that it’s a microcosm of the larger UCT employee base in terms of ethnicity, age, gender and education levels.
One hundred full-time, retirement-fund contributing employees and final beneficiaries at the GSB were invited to participate – including all academic, administrative, finance, marketing and other support staff. A total of 40 valid survey responses were received and analysed. The findings were very revealing:
- 82.5% of the employees surveyed expressed concern about the kinds of portfolios in which their retirement funds were invested.
- 77.5% believed that their retirement fund could be used as an instrument for social change.
- 67.5% declared that they were likely to invest an average of 38% of their retirement funds in an SRI portfolio, with a further potential 30% of respondents still undecided.
How do we get from intention to action?
For these good intentions to become investing realities, we will need to educate ourselves further first. This pilot survey of GSB employees has indicated that, although there is a strong interest, the majority of people are quite passive and don’t know how to proceed.
- A two-thirds majority of respondents admitted that they were not aware of how their retirement funds were currently being invested.
- 69% expect their trustees to invest their retirement funds in a sustainable and responsible manner – taking into consideration Ethical, Environment, Social and Governance screening criteria (EESG).
- But 85% admitted that they haven’t enquired about their retirement funds policy regarding EESG criteria.
As retirement fund contributors, we are at the “top” of the investment value chain. We are the ultimate owners of our retirement assets and the final beneficiaries of the long- term returns generated by investments made on our behalf. Trustees are appointed to represent our “best interests”. It should therefore be natural for us to have a say in how and where our retirement funds are invested.
In fact, these days it’s required. Regulation 28 of the South African Pension Funds Act states that fund trustees must give serious consideration to long-term outcomes by integrating EESG factors into investment analysis and activities as part of the delivery of superior risk-adjusted returns.
So, every retirement fund in South Africa is actually required to do this. As employees, we now need to start thinking seriously about how we could be taking a leading role in helping our employers shift to more people-friendly and earth-friendly investment practices.
ESSAYS IN QUESTION: Three key thinkers ask three key questions. What do civil society activists do? Do employees care about responsible retirement investing? And is innovation in Africa the “leapfrog” solution everyone seems to think?
- → Kayum Ahmed: What do civil society activists do – and not do?
- → Dr Stephanie Giamporcaro: Is it true that South African employees don’t care about investing responsibly?
- → Dr Jolyon Ford: African innovation – The leapfrogs and left-behinds