GUEST BLOGGER: Andrew C. Canter, Chief Investment Officer, Futuregrowth Asset management


“Sustainability” is a big, far reaching word: So one has to start at
the top, and drill down.

Capital, whether seeking economic and/or social gains is attracted to
factors that are inherently good for the overall economy.  First, a
sustainable economy must have an educated, productive and
entrepreneurial workforce – from the CEO to shop floor.  Sadly, South
Africa’s (and, it seems, Africa’s) education system appears to have a
structural inability to adapt, thus perpetuating underemployment.
Second, but equally vital, are clarity of Property Rights – including
a sound constitutional framework, the rule-of-law and stable
regulatory regimes.   Third, nations need to demonstrate a low
tolerance for corruption in all spheres.  Aside from those factors,
capital seeks economic returns:  While we hope, and expect, that many
investors will seek positive developmental impact with their funds, it
remains true that private capital investors “keep score” in economic,
money terms.

So how can the asset management industry promote sustainable
investment in Africa?

At the highest level, we should be active in promoting the principles
required for a modern economy – continually reasserting and defending
fundamental issues of property rights, basic freedoms and
transparency.  When other’s property rights are challenged we must
defend them as if they were our own.  A good example is the
ill-informed movement for “prescription”  of pension fund investments
– which represents a clear challenge to property rights and freedom of
choice.  When press freedoms are challenged by governments we must
speak out to defend a free and independent press.    In a continent
noted for its venality, industry members must take a strong, moral
stand against corruption in government and, most personally, within
our own industry:  Whether in the form of inappropriate “gift giving”
or acceding to client “requests”.   It is happening today, and there
is little moral ground to promote “Sustainable Investing” when our own
industry is “playing ball” with corrupt practices.

More pragmatically:

   * We must build investment processes that can earn sustainable,
positive economic returns on client funds:  Underperformance – or
outright losses – by any fund manager will undermine the diligent
efforts of the entire sustainable investment industry.
   * We must find a common lexicon: The world of Sustainable
Investing is littered with extant and extinct terminology and
nomenclature.  Experience shows that virtually every presentation on
Responsible Investing, by any party at any time, starts with a set of
“definitions”:  It must be observed that “bond” presentations don’t
start with definitions of “bonds”, and “equity” presentations don’t
start with definitions of “equity”.  In failing to have an agreed
framework of language we confuse investors and the market and,
frankly, are our own worst enemies.
   * We must be honest, transparent and forthright about the likely
risks and returns of the investment products we create and promote.
Justice Albie Sachs said that “a constitutional state repudiates
lying, totally.  Openness and integrity are not merely the virtues of
honest individuals, they are the core elements of the trust that
should bind citizens and government together in a single polity”.
While we are entitled to expect ethics and honesty from governments,
and we must live up to our own highest expectations.
   * There needs to be a frank admission that sustainable investing
is rich with judgment and personal biases about screening tools.  We
need to allow the ultimate investors exercise discretion, as much as
they may wish, about what “sustainable” or “social” investing means to
them.
   * Lastly, in developed markets, the Responsible Investing movement
began with individuals who sought to “think globally, act locally”…
and that movement spread upward (over decades) to institutional funds.
 In South Africa (and I’d guess most emerging markets) the RI movement
is seeking to establish itself at the institutional level first.  This
strikes me as flawed… a case of “do with others’ money what I wouldn’t
do with my own money”.  Let us find common cause with individuals, let
us invest in our own money in our best RI ideas, and let this movement
spread organically upward.  Let us sell what we would buy.

In summary, it is through our vigilance, voice, principles, diligence
and actions that we can seek to promote Africa’s sustainable
development.