CONNECTING CAPITAL TO

SUSTAINABILITY:

A review of the role of ESG criteria

in the decision-making processes of

institutional investors

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Colin Habberton

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Some Personal Questions…

• Do you care about what you drink, eat and wear

and how it all was produced?

• Do you think about the role you could play in

addressing the challenges the world faces, with

the money you spend?

• Do you know where your money is invested?

Particularly your savings and pension fund?

• Would you make different decisions about your

investments if you found that they are not in line

with your personal values?

Background

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Introduction

• Topic fits into a broader study into the various

factors influencing the decision-making

processes of institutional investors

• Institutional investors include asset owners and

asset managers that are responsible for over

80% of value of investment in the South African

economy

• The flow of capital as well as its benefits and

influence on markets, institutions and individuals

are directly connected to the decisions of

investors

Research questions

• Do ESG criteria influence institutional

investors’ decision-making?

• What interests, needs, values, norms and

regulations influence investor decision-

making?

• How would understanding these dynamics

contribute to the practice of responsible

investing towards sustainable

development?5

Definitions: Lost in Translation

• (Institutional) Investors

• Capital(s)

• (E)nvironment, (S)ocial, (G)overnance

• ‘Sustainability’

• Responsible/Ethical/Green/Impact Investing

• [The Politics & Psychology of] Decision-making6

Investment Continuum

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• ‘Responsible’ Investing?

Investment Ecosystem in South Africa

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Enablers, Drivers & Barriers:

2007

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Additional Enablers: October

2013

• Normative & Regulatory Forces

• UNPRI

• King III

• CRISA

• Regulation 28

• Market Forces

• JSE SRI ESG Investor Briefings

• Integrated Reporting

• GEPF & PIC

• Marikana; The Aftermath of GFC10

Preliminary Findings

Is decision-making ‘connected’ to E,S, and/or

G?:

• The market power exerted through the

GEPF

• The pervasive adoption of the King III report

on corporate governance

• The leadership role of its publisher and

promoter, the IODSA

• The aspirational value of inclusion in the

JSE’s SRI Index by corporate South Africa

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Growth in JSE SRI Index

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Preliminary Findings

• The creation of CRISA and the start of the

monitoring of industry compliance to its

tenets

• The growth in the adoption of Integrated

Reporting standards by SA business

• The material impact of negligence to

ESG factors exemplified by the GFC and

Marikana

But,

• Does compliance = commitment?

• Are there other factors affecting decision-13

Lip Service or perhaps just

Lipstick?

14

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Purpose of the Research

• Contribute new perspective on the influence

of ESG criteria on the investor decision-

making

• Develop understanding of the dynamics

behind the practice of responsible investing

• Encourage the prevalence of an investment

paradigm supporting sustainability

• Promote ongoing research into the role of

investors regarding the social and

environmental impact of their decisions

Final Thought

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CONNECTING CAPITAL TO

SUSTAINABILITY

19

Colin Habberton

colin.habberton@relativ.co.za

@relatomics