Sygnia co-founder Magda Wierzycka says the efforts of most companies’ environmental, social and governance (ESG) investing is “largely meaningless” as it is used as a tick-box exercise for marketing rather than achieving real change.
“I draw a very firm distinction between ESG investing and impact investing,” Wierzycka said in a discussion at the Investment Forum 2021.
“ESG investing is all about marketing and presenting yourself as the most investible company in terms of following environment principles and objectives set by the UN or good governance, which should be a standard of any company. For us it’s all about impact investing rather than ESG investing, which is actually largely meaningless.”
Wierzycka’s comments come just weeks after two of Sygnia’s bigger rivals, Ninety One and Coronation Fund Managers, both made strong ESG commitments during recent results announcements.
Ninety One CEO Hendrik du Toit said in May that it was moving away from making new investments in fossil-fuel companies. The asset manager, which was spun out of Investec in March 2020, also joined the Net Zero Asset Managers Initiative, which aims to support only investments aligned with achieving net-zero fossil-fuel emissions by 2050 or sooner.
Coronation CEO Anton Pillay also said after the release of the company’s interim results that it would be taking a stronger ESG stance. He said that Coronation had also asked at least 89 JSE-listed companies to adopt the framework prescribed by the Task Force on Climate-related Financial Disclosures in their integrated annual reports.
“The opportunity should be to invest in something that makes a true affect, not just clean themselves up for show,” Wierzycka, who made a surprise return to Sygnia as executive chair on Wednesday, told Business Day in a follow-up interview. “Unfortunately the way ESG has played itself out today it is a little bit of paying lip service.”
Wierzycka said that while ESG remained important and that asset managers had no choice but to screen investments based on client concern, she felt impact investing was a more powerful tool to achieve change.
“The most exciting field is impact investing, it’s not ESG investing,” she said, mentioning the venture capital firm she founded, Braavos Investment Advisers, which owns about 20% of Oxford Sciences Innovation.
Impact investing targets both financial returns as well as measurable socioeconomic and environmental outcomes by taking a more active role in managing companies via equity stakes.
“We’re now invested in 99 different companies where absolutely every single company has the potential to change the way we do things, from agriculture to clean energy to health-care provision,” she said. “We recently invested in a company that has developed the IP that potentially can increase crop yields 20%-30%.”
John Green, chief commercial officer of Ninety One, responded to Wierzycka’s comments via video conference in London by saying the pursuit of more sustainable development was a significant investment theme that should not be dismissed.
He argued that ESG investing was critical to both driving returns as well as innovation to develop water purification, decarbonisation and the sustainable reuse of plastics and other materials.
While Green acknowledged that asset managers ran the risk of adopting “generic ESG strategies”, he said the proper integration of environmental and social considerations into the way portfolios are constructed and managed was becoming more mainstream.
“Do not underestimate how significant this drive is from global asset owners and global investors to find ways to deploy capital for decarbonisation,” he said.
Green said that SA was “enormously challenged” due to its heavy reliance on coal-fired electricity, which was likely to see the country’s exports incur carbon taxes in future.
“The minute carbon taxes come, are we going to be able to export competitively from SA? Absolutely not,” he said. “As an asset manager, our operations in SA are four times more carbon intense than our operations here in the UK simply because of the carbon intensity of the energy system in SA.”
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