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Local pension funds see sustainability as important as returns

New research commissioned by Ashburton Investments and conducted by Intellidex, finds that positive attitudes towards ESG are well entrenched.

Local pension funds see sustainability as important as returns

In a survey of 49 large South African pension funds, representing 65% of the AUM in the local market, 91% of respondents said that they expect sustainable investing to become more important over the next five years.

On a weighted bases, this increases to 98.5%.

‘Increasingly, South Africa institutional investors are recognising the importance of ways of making a contribution to grow our economy in a sustainable and more inclusive manner,’ said Heather Jackson, Head of Impact Investing at Ashburton Investments.

This is most obviously illustrated in the answers respondents gave about their investment objectives.

On a weighted basis, 76% see improving the sustainability of their portfolios as ‘extremely important’. A further 19% see it as ‘very important’.

This aligns almost exactly with pension funds’ views on generating risk-adjusted returns – 74% rate this as ‘extremely important’, and 18% as ‘very important’.

Source: Intellidex & Ashburton Investments (click to enlarge)

When asked which ESG issues had explicitly been adopted into their investment strategies, pension funds indicated that BEE was their primary concern. Overall, 94% of respondents recognised it as a key factor.

Other significant issues foregrounded by pension funds are impacting strategies aimed at solving social or environmental problems, and thematic strategies relating to global sustainability.

Source: Intellidex & Ashburton Investments (click to enlarge)

‘Encouragingly, institutional investors are not just paying lip services to these factors – they are putting money behind them too,’ Ashburton noted. ‘When asked about changes in portfolios over the last five years, 81% said they had changed their portfolios’ exposures to help solve social and environmental challenges while also taking into account ESG factors in the investment analysis process. And 69% said they had changed their portfolios to improve black economic empowerment.’

However, pension funds also noted a number of constraints in this space.

Of those surveyed, nearly three quarters noted that a lack of transparency and reported data impeded progress on sustainable investing. Just over two thirds also highlighted the difficulty in measurement.

Source: Intellidex & Ashburton Investments (click to enlarge)

The full report is available here.

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