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CONNECTING CAPITAL TO
SUSTAINABILITY:
A review of the role of ESG criteria
in the decision-making processes of
institutional investors
Colin Habberton

1
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?
2
Background
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
4
Research questions
• Do ESG criteria influence institutional
investors’ decision-making?
• What interests, needs, values, norms and
regulations influence investor decisionmaking?
• How would understanding these dynamics
contribute to the practice of responsible
investing towards sustainable
5development?
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-making
6
Investment Continuum
• ‘Responsible’ Investing?

7
Investment Ecosystem in South Africa

8
Enablers, Drivers & Barriers:
2007

9
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 GFC
10
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
•11 The aspirational value of inclusion in the
Growth in JSE SRI Index

12
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?
13
Lip Service or perhaps just
Lipstick?

14
Purpose of the Research
• Contribute new perspective on the influence
of ESG criteria on the investor decisionmaking
• 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
17
Final Thought

18
CONNECTING CAPITAL TO
SUSTAINABILITY
Colin Habberton
colin.habberton@relativ.co.za
@relatomics

19

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Connecting Capital to Sustainability: SSD Conference 2013 (US)

  • 1. CONNECTING CAPITAL TO SUSTAINABILITY: A review of the role of ESG criteria in the decision-making processes of institutional investors Colin Habberton 1
  • 2. 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? 2
  • 4. 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 4
  • 5. Research questions • Do ESG criteria influence institutional investors’ decision-making? • What interests, needs, values, norms and regulations influence investor decisionmaking? • How would understanding these dynamics contribute to the practice of responsible investing towards sustainable 5development?
  • 6. 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-making 6
  • 8. Investment Ecosystem in South Africa 8
  • 9. Enablers, Drivers & Barriers: 2007 9
  • 10. 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 GFC 10
  • 11. 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 •11 The aspirational value of inclusion in the
  • 12. Growth in JSE SRI Index 12
  • 13. 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? 13
  • 14. Lip Service or perhaps just Lipstick? 14
  • 15. Purpose of the Research • Contribute new perspective on the influence of ESG criteria on the investor decisionmaking • 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 17
  • 17. CONNECTING CAPITAL TO SUSTAINABILITY Colin Habberton colin.habberton@relativ.co.za @relatomics 19

Editor's Notes

  1. Individual decisions have the power to transcend markets, nations and the institutions within them.