How far is SA in achieving ESG goals?

Thato Kola, ESG Analyst at Matrix Fund Managers, recently sat down with CNBC Africa's Godfrey Mutizwa to delve into the Environmental, Social, and Governance (ESG) issues in South Africa's investment landscape. Kola expressed his excitement about the opportunity to enhance ESG principles within the business realm and underscored the importance of putting ESG considerations at the forefront of decision-making processes. As a signatory of the United Nations Principles for Responsible Investment, Matrix Fund Managers is dedicated to integrating ESG considerations into its investment strategies across equities, fixed income, and business development sectors. Kola highlighted the growing trend of companies in South Africa acknowledging the significance of ESG factors in mitigating risks and fostering sustainable business practices. He emphasized the shift towards viewing ESG not as a mere cost burden but as a catalyst for creating value and enhancing corporate responsibility. With more companies embracing ESG frameworks, the country is witnessing a positive transformation towards conducting business more ethically and responsibly. When probed about the level of compliance among companies listed on stock exchanges in South Africa, Kola acknowledged the evolving landscape and the absence of concrete metrics to measure compliance. However, he noted a global trend of increasing investments in companies that prioritize ESG considerations, particularly in areas such as climate change. Companies are progressively aligning their objectives with ESG criteria, as evidenced by initiatives like issuing green bonds and sustainable financing. Addressing skepticism surrounding ESG initiatives, Kola emphasized the intrinsic link between financial returns and ESG considerations. He highlighted how companies focusing on governance, employee welfare, and community engagement are more likely to thrive in the long run. Kola stressed the need for businesses to understand that ESG factors are not standalone considerations but integral components that drive sustainability and shareholder value. As part of Matrix Fund Managers' approach, Kola detailed the incorporation of ESG scoring systems alongside traditional business evaluations to assess companies' sustainability and shareholder value potential. The firm utilizes a range of ESG screening tools and integrates ESG factors into portfolio and sector meetings to make informed investment decisions. In terms of driving increased involvement in ESG issues, Kola suggested the need for cohesive frameworks, potentially led by industry bodies like stock exchanges or regulatory agencies. While legislation may not be necessary, clear frameworks and reporting standards could enhance transparency and accountability, ultimately showcasing the value of ESG to shareholders and communities. Kola also addressed the sectoral awareness of ESG issues, noting that the mining sector, historically scrutinized for its environmental impact, has been proactive in adopting ESG practices to build credibility with investors. While no sector is resistant to ESG principles, Kola emphasized the importance of companies, regardless of industry, embracing ESG considerations to secure their future sustainability. In conclusion, as South Africa navigates the complexities of ESG integration, Kola's insights underscore the pivotal role of ESG in reshaping the country's investment landscape and driving sustainable growth.