Green is now, and the future, in health, food, lifestyle, and economics; and no bank or investor can ignore it. Nedbank has gone ahead of rest of the pack to be top in South Africa. In February 2020, Euromoney awarded Nedbank Private Wealth the second-best bank in the category of Environment, Social and Governance (ESG)/Impact Investing in Africa; second to UBS Group AG, a Switzerland based multinational investment bank.
They moved from 5th place in 2019 outpacing Standard Bank (Africa’s largest lender) and Absa, who in 2019 occupied 2nd and 4th respectively. There must have been something that Nedbank did in these few years, that has made them climb the Impact Investing ladder to that top spot.
Analysing it closely, let’s begin with that 186 years in the banking business, Nedbank believes and has practised “creating value by using their financial expertise to do good”. In essence, they are the go-to for ESG or Impact Investing.
What is this ESG/Impact Investing?
Impact investing refers to investments "made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return". Impact investing seeks to support organizations that will create social and environmental benefits, in addition to generating financial returns. Impact investors want their money to make a difference for employees, clients, and other groups in society — while creating financial value.
According to Bain and Company, the idea that investors can improve society while seeking solid returns is rapidly gaining ground. Many private equity (PE) funds are incorporating environmental, social and governance (ESG) goals into their strategies, and public interest in ethical investing has taken off. These ESGs are an initiative of the United Nations, and published and monitored as the Principles of Responsible Investment.
The six Principles for Responsible Investment (PRI) are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating environmental, social, and governance (ESG) factors into investment practices as well as support the international network of investor signatories. Signatories report on their responsible investment activities annually.
According to Bain and Company, the number of fund managers who have signed the United Nations-supported Principles for Responsible Investment (PRI) grew to more than 2,000 in 2018 from 1,200 in 2013. The $82 trillion in assets under management by these signatories increased by a compound annual rate of 19% in the same period. Of 22,000 investors worldwide, 78% said they place more emphasis on sustainability now than they did five years before, according to Schroders 2017 Global Investor Study.
In South Africa, the law does not make necessarily make ESG mandatory, but in Regulation 28 is issued under the Pension Fund Act makes a note that was more of saying “we strongly suggest that it would really be great if your considered ESG criteria when making investments”. The Financial Sector Conduct Authority (FSCA) then issued a guidance statement on what retirement funds should be saying about ESG in their investment policy statements. So, there is a gentle but firm nudge in the South African investment industry, and Nedbank is an early bird.
Okay, back to Nedbank.
On March 3rd, 2020, Nedbank is announcing their Group’s 2019 annual results, and for the land ten years to 2018, their Revenue has almost doubled from R49 Billion to R72 Billion. Their profit doubling from R4 Billion in 2009 and R10 Billion in 2018. Whilst a lot of factors came into play in the South African economy affecting business even for a Bank, the resolve of Nedbank became clearer as they moved their efforts and operations in the ESG/Impact Investing sphere, with a global value well over US$80 trillion to date.
They were are an early adopter of Impact Investing, going green as is their nature, and through their subsidiary Nedbank Private Wealth, they are forged a space in the global markets as the go to place in Africa for all investments relating to all things ESG.
Nedbank Private Wealth is an award willing business right from its technology to its service. Since the launch of its Private Wealth Customer App in 2017, the app has won several independent local and international awards for its world-class quality from being one of the top 3 financial solutions apps in South Africa, MTN Business App of the Year Awards 2017, one of the top 5 mobile apps for wealth services globally, Mobile Apps for Wealth Management 2017 benchmarking report, MyPrivateBanking Research, and a joint second position in the Mobile Apps for Wealth Management 2018 benchmarking report, Cutter Associates.
Shaping a business to become green is not an easy thing, but Nedbank did that so well in that their modern methods and technology that are in compliance of ESG/Impact Investing making them scalable. Using mobile apps, the investor is for example, able to see where their funds are bringing impact, and increase the relationship with its customers. As an investor in Nedbank Private Wealth, I can relate with the need to invest in things that have an impact to the environment, social, and governance, as I make profits from the investment.
Why is Impact Investing important for a South African business?
Ignore Green at your own peril, as the world is now more conscious of the “green movement” and investment into business loans are fast moving into the sphere of being guided or based on the Principles of Responsible Investing (PRI).
Investors world over are not concerned with the “responsible investing” aspect of a company or entrepreneur seeking funding. The PRI works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. Nedbank picked this up early and has shaped its business into being an ESG friendly bank, that making them able to be source of international funds from global investors that are proESG banks and projects.
Nedbank stands a better chance to channel construction funds going into the new green global movement in construction called “Green Building”. Green building refers to both a structure and the application of processes that are environmentally responsible and resource-efficient throughout a building's life-cycle: from planning to design, construction, operation, maintenance, renovation, and demolition. The Green Building Council South Africa, a pioneer of Green construction at industry, national and regional level is fast recruiting investors, property developers, in the construction of green buildings, with billion-rand projects rolling out every month in South Africa. This money moves through green friendly banks, and Nedbank is the greenest in South Africa.
The Principles of Responsible Investing require an investor to adhere to six things –incorporate ESG issues into investment analysis and decision-making processes; be active owners and incorporate ESG issues into ownership policies and practices; seek appropriate disclosure on ESG issues by the entities in which are invested in; promote acceptance and implementation of the Principles within the investment industry; work together to enhance our effectiveness in implementing the Principles; and report on activities and progress towards implementing the Principles.
Even though these are currently affecting the financial institutions or all in the investment industry world over, it will trickle down to the start-up or operating business looking for investment from these institutions as it is part of the principles of responsible investing to educate recipients of funding. As Pension Funds and other investment vehicles shape themselves to be more ESG friendly, the demand for such business ethics will increase and cannot be ignored today by the bank customer, individual or business.
Nedbank is green, and has chosen to be the bank that brings this, and more efficiently, to the South African business, and Africa, as it configures itself as the bank of the future. The future is Green.
The Author: Bakani Ngulani is the founding director of BN Business Solutions, an accounting firm dedicated to serving Small and Medium Enterprises in South Africa. Ngulani has vast experience in accounting, taxation, consultancy and audit function of companies across various categories, including retail, mining, manufacturing, textile, consultancy and non-profit organisations.
Sources: Euromoney, SA Stats, Nedbank, UNPRI, Bain & Company
