As the newly appointed local representative of the UN-supported Principles for Responsible Investment, GSB graduate Xolisa Dhlamini is working to ensure South Africa takes responsible investment seriously.
The market-based economy that drives the allocation of the earth’s scarce economic resources has given rise to a number of social inequalities and environmental impacts which affect organisations and individuals alike. Food and water insecurity, limited natural resources and climate change have become material to the world of business.
An important aspect of managing these imbalances is responsible investing, says Xolisa Dhlamini, newly appointed South Africa Network Manager for Principles for Responsible Investment (PRI). The UN-supported PRI, launched in March 2006, aims to encourage collaborative engagement and to better incorporate environmental, social and governance issues in decision-making and ownership practices – thereby ensuring that investment practice holds itself responsible in the way it performs.
“The impact of poor corporate governance on shareholder value, accentuated by the global financial crisis, has lifted issues such as transparency, corruption, board structure, shareholder rights, business ethics and risk management to the top of the investor agenda,” says Dhlamini.
By putting into place responsible investment practice, South Africa has an opportunity to overcome poor corporate governance. “Africa has an abundance of natural resources. We need to make sure we develop economies without damaging those – we need to find ways to avoid previous mistakes, and the mistakes of developed countries. This is where responsible investment plays an important role,” he says.
Responsible investment is an approach to investment that explicitly acknowledges the relevance to the investor of environmental, social and governance factors, and the long-term health and stability of the market as a whole. It recognises that the generation of long-term sustainable returns is dependent on stable, well-functioning and well governed social, environmental and economic systems.
Ensuring this takes place is at the core of the UN-supported PRI; Dhlamini accepted his position in April 2013, after completing his MPhil in Development Finance at the University of Cape Town’s Graduate School of Business.
Having studied a BCom in Economics and Business Finance at the University of the Witwatersrand in 2004, Dhlamini found himself thrust into the world of investing, notching up eight years’ experience in investments, and gaining an extensive knowledge of financial markets, investment instruments, and the economic and financial regulatory framework.
Although well secured for a future in investment advisory, Dhlamini’s desire to contribute to socio-economic upliftment meant he was left feeling unfulfilled.
“After the 2008 crisis I became disillusioned by the financial services industry. And at the time I was advising pension fund trustee boards to invest in an industry that was collapsing from short-termism poor governance and poor transparency. This did not sit well with me ethically as I was not sure if I could trust the investment vehicles offered by financial industry. This made me want to contribute to using finance for the greater good and reminded me how much I wanted to be involved in socio-economic development”.
To do so he knew he needed to gain new skills, which is where the GSB’s MPhil in Development Finance came in. A new programme at the business school, the MPhil in Development Finance offers participants the skills to influence development trends in an emerging context and make large-scale changes that can impact positively on the quality of life of people around the world.
“Growing up in one of the poorest townships in South Africa (Alexandra Township) had shown me the need for economic and social development, and my experience in investing made me realise what part I could play in this. It’s very clear that responsible investing in private equity and venture capital can contribute to the sustainability of economic development in emerging economies,” he says.
South Africa has started to realise this, and in 2011 the Code for Responsible Investing in South Africa (CRISA) – an initiative to formally encourage institutional investors to integrate into their investment decisions sustainability issues such as environmental and social goals and good governance – was put into place by various stakeholders, such as the Government Employees Pension Fund (GEPF), the Association for Savings and Investment South Africa (ASISA), and the Institute of Directors in Southern Africa (IoDSA).
Research from the GSB, published in the South African Investing for Impact Barometer, reveals that 51% of private equity and venture capital investors and 54% of asset managers report that they have been investing for social impact.
But the Barometer also revealed that while international standards or initiatives such as PRI are known to asset managers involved in the socially responsible investment space, private equity and venture capital firms are less aware of them. To date the PRI has been signed by 75% of South African asset managers but by only 15% of the private equity and venture capital firms surveyed.
Reaching the other 85% through the creation of networks is part of Dhlamini’s new role, and one which he is driving into with gusto. “I feel like I’m in my dream job, able to apply my experience and skills into a cause that I believe in. At the end of the day, responsible investing is just sensible for a business’ bottom line, and offers a chance to minimise any negative consequences that may threaten the sustainability of economies. But more than that, it’s also a chance for businesses to stand up and make a significant social impact. Businesses need to ask themselves – ‘what are you doing to make a difference?’ One might be surprised how often social impact is aligned with financial impact, and in the end, is in one’s own interest.”