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Sponsored Content: The A to Z of Responsible Investment

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As society becomes more unequal and the effects of climate risk become more material across the globe, sustainable practices are increasingly being applied across all industries. This is no more evident than in the investment world where, in the last few years, the industry has seen increasing acceptance that sustainability issues can and do influence long-term investment outcomes. Issues such as resource depletion, climate change, poor governance and social inequality, pose both investment and systemic risks to investors’ goals.

The global Covid-19 pandemic has brought the importance of this responsible investment approach into even sharper focus. The lockdown in South Africa, in particular – put in place to help reduce the spread of the disease –

has had a devastating impact on our society. Now more than ever, the urgency of creating an economy around the concept of shared value has come to the fore, with a need for a stakeholder inclusive model where value is shared across participating shareholder groups. However, there is still a need for increased understanding and clarity around the concept of ‘responsible investing’ and all its associated terms. Responsible Investment is a specific term coined by the United Nations and is defined as “an approach to investing that aims to incorporate environmental, social and governance factors into investment decisions, to better manage risk and generate sustainable, long-term returns”.

There are many other terms associated with the concept that can cause confusion. We have therefore created the below glossary in a move to try and increase awareness around such an important practice for the sustainability of our world.When shareholders exercise their rights, actively engaging with investee companies on business strategy, including sustainability issues, to reduce investment risk and/or enhance long-term shareowner value.

The many terms associated with responsible investing may seem daunting to the uninitiated. However, the broad concept of responsible investment is a simple one: when it comes to long-term investment, it is in the interests of all players in the financial ecosystem to offer a proactive role in creating long-term sustainable outcomes for all stakeholders. Sustainability is a long-term macroeconomic theme that is fundamentally reshaping the competitive landscape across every industry.

 

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