Environmental, Social and Governance (ESG) investing has become increasingly mainstream in recent years. Globally this type of investing accounts for somewhere between one and two out of every four investment dollars. More than 2,250 money managers who collectively oversee US$80 trillion in assets have now signed on to the United Nations-backed Principles for Responsible Investment.
Across Africa it would be fair to say that ESG investing has not been at the top of the priority list for corporates and investors. However, that is changing, and these issues will have an increasingly important impact on the investment landscape. Companies in Africa big and small will experience increased demands and expectations regarding how they conduct business. Sustainability in business is a megatrend and it will continue to grow.
The African reality is marked by the dominance of extractive industries, high exposure to climate change and pressing developmental needs. The dominance of extractive industries poses a clear obstacle to the rise of ‘green’ investment strategies on the continent. Sub-Saharan Africa is the world’s most commodity-dependent region, and much of its income is a product of the export of petroleum products, coal, metals and minerals. Yet there are more opportunities in Africa for investors to make a positive environmental or social impact than in any other region in the world.