This week’s podcast features Peter Brooke in discussion with Head of Stewardship, Nicole Martens, on COP27 and how OMIG is engaging its investee companies to transition to more sustainable and inclusive ways of doing business.
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Peter Brooke 00:00
Good day. My name is Peter Brooke. I'm a Portfolio Manager at the Old Mutual Investment Group. This is Macro Perspective 47 of 2022. And today I'm going to talk to Nicole Martens, who heads our stewardship business. This is an area that has more than 400 billion under advisement on behalf of us and other big pension funds, where they are driving to get better environmental and social and governance standards into corporate South Africa. She's just been to COP27 In Egypt. Tell us what it was like.
Nicole Martens 00:30
It was great. It was overwhelming. And it was hot. And there were 45,000 people all talking climate, about 10,000 of which actually got lunch because of the under-catering!
Peter Brooke 00:40
Okay, wow. So, what was your key takeaway?
Nicole Martens 00:44
The key takeaway, as always, from the COPs is that the problem we face is significant. And we are running out of time to take action. We need to do more, and we need to do it fast.
Peter Brooke 00:54
Okay, so what's Old Mutual doing about this?
Nicole Martens 00:56
We are working actively as stewards of our clients' capital with the companies in which we invest, to make sure that they are putting in place concrete plans to transition to more sustainable and inclusive ways of doing business.
Peter Brooke 01:09
Are they actually doing it?
Nicole Martens 01:11
Ja, we're pleased to report actually, of the top 10 emitters in the Capped SWIX, we've seen progress made by those companies every day.
Peter Brooke 01:19
Okay, let's make it a bit more tangible. How did Team South Africa turn up? And where are we on getting all these billions that we need to transition from an old style coal-driven economy into something modern and new.
Nicole Martens 01:31
So, Team South Africa did really well this COP, everybody loves Cyril. They also like the Just Energy Transition Investment Plan. Last year, we secured $8.5 billion toward that plan. This year, we managed to lock in another 10 billion. It's a far cry from what we need, and government definitely can't do this on their own, we need SA Inc to step in and support the transition plan. One area that's a clear opportunity to do that is in transformation of the energy grid through renewables. The progress there has been slow to date with the reprograms. But we expect that that's going to accelerate now, with support from this plan.
Peter Brooke 02:06
I think that really is our challenges as a country, we're good on the plans, but we're not so good on the implementation. And from my perspective, I've been very bullish on the fact that the private sector has been allowed into the energy sector, because we've got a very efficient private sector, and I thought they would be able to solve this. And, as you said, it's been much slower than I would have expected, which is disappointing. So, I think that means we're not out of the woods in terms of loadshedding.
And... look at a personal level, I've just recently put in a solar system. And while the return on investment isn't as good as what I can get from buying some of the shares in the South African market, there are a lot of extra benefits. Firstly, it answers Nicole's call to do something about this. We can't sit around while the planet burns. The second big element is it reduces stress in my life, and probably more importantly, my wife's. And much like the intangible benefit of better risk adjusted returns, I think this is incredibly valuable. Finally, you've got to remember this is a very tax efficient method, because what it does is it reduces your costs going forward. Whereas if you're getting more income, you pay tax on that. When you save on costs, that's a permanent benefit with no tax deduction. And that will grow as inflation, as it comes through with higher electricity prices. I think it's the least one can do if one can afford it.
Hope you enjoyed this podcast until next week.