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Africa Cup of Investments Conference 2013

Part 3

The theme of this year’s conference was “Challenging the Investment Mindset”. As in previous years it was a well organised, very interesting and informative conference that can only be recommended to anyone who has a role to play in the pensions industry. You may find the one or other topic of interest to you or thought provoking in which case please feel free to share your views with our readers.

Sustainability: An Investment Perspective

Glenn Silvermann shared some thought provoking and scary facts with the audience in a riveting presentation. He identified 4 unsustainable trends:

  • We live on a finite planet. The earth is full and since it does not get bigger the economy will stop growing. As far as our natural resources are concerned, we are busy eating into capital.
  • Inequality between rich and poor and a widening income gap.
  • Demographics where the number of retired people continuous to grow relative to those in employment.
  • Unsustainable government debt.

He expressed the view that these unsustainable trends have not been priced into market yet. The way forward should be that the investor starts focusing on responsible investing and on economic, social and governance (ESG) considerations and should start asking corporates questions addressing these matters. An interesting observation was also that ESG should not be measured via investment returns but should rather be considered as an investor liability.

ESG idealism versus realism: overcoming doubts and demonstrating opportunities for returns

In this panel discussion some interesting comments were made that are worth sharing with our readers.

  • The market displays a natural trend toward ‘short-termism’ with regard to manager compensation.
  • Investors are hesitant to implement responsible investing principles because of the absence of data that measures its impact on returns.
  • Although pension funds should take a long-term view on investments, they typically outsource the problem of responsible investing to their consultants and asset managers.
  • SA regulation 28 now has a preamble that makes reference to responsible investing. It distinguishes between investing in sustainability and building responsible investing principles into the investment process.
  • Responsible investing should be focused on where business and politics converges in order to yield results.

A CEO conversation

In his CEO conversation Edward Kieswetter shared some interesting observations.

  • When evaluating a business decision trustees should apply a ‘substance over form’ principle. One should first consider what the impact of a decision will be on the saver and if it will be negative one should not pursue the decision.
  • In everything one does, one should not think about what one does but about the impact it will have.
  • Increasing regulation and compliance requirements for trustees reaches a point of inflection where costs continue to increase but results actually worsen instead of improving.
  • He relayed the following 3 messages to government:
    • It should stop talking about business as being its enemy where it is in fact the engine of the economy.
    • Be clear of the consequences of the actions its takes.
    • Engage the private sector in it decision making process.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.

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