Leaving A Legacy Of Responsible Investment
As a development economist, and as an African, I have dedicated my career to date to solving for the development challenges of the continent. Over the years, I have worked with private and public sector clients across multiple countries, attempting to develop and implement projects, policies and programmes aimed at generating sustainable growth and material impact. It didn’t take me long at all to realise that each of these interventions relies on one shared critical success factor: money. Without investment there can be no development; no growth; no progress. But it needs to be the right kind of investment – that is, responsible investment that considers material impact and that integrates what would traditionally be considered ‘non-financials’.
In recognition of this reality, PRI’s focus is on the critical role of asset owners – specifically, large institutional investors. The position that these large funds hold at the top of the investment chain means that they can generate impact and catalyse change at scale.
In my role with PRI, my focus is on supporting institutional investors to invest responsibly. Working with investors at this level is extremely satisfying to my overarching agenda of facilitating growth and development in Africa [and beyond]. Collectively, PRI now has close to 3,000 signatories representing over USD90trn in AUM, with African and Middle Eastern signatories accounting for about USD1trn of that total amount. This is a sizable amount of capital (the former represents more than half of all institutional investment globally), and the impact in channelling this collective wealth toward responsible investment can be significant.
As important as they are in the responsible investment mission, and as effective as they can be, institutional investment vehicles are often subject to substantial administrative, policy and regulatory constraints, which can at best slow down progress, and at worst halt it altogether. Thankfully, as I (re)discovered recently, these are not the only sources of significant wealth.
In February, I spoke at the Africa Family Office Investment Summit (the Summit) hosted by Alea Global Group in Mauritius. Since my experience lies predominantly in the institutional investment space, I entered the room relatively unsure of what to expect. The conversations I am accustomed to having revolve around the management of many hundreds or thousands or hundreds of thousands of peoples’ money, around fiduciary duty and using ESG integration models as a market differentiator. The investors I work with have an entirely different modus operandi to UHNWIs – for all intents and purposes, these are two completely different worlds.
And yet, there are some striking similarities. Most notably, both institutional investors and UHNWIs are investing to generate sustained and maximised returns (a mandate in which, by the way, there is absolutely no shame – provided it is implemented responsibly). Both investor groups, too, are looking to achieve this goal within an ever-evolving investment landscape using a growing list of investment tools and vehicles. And both kinds of investor are highly aware of – and concerned about – the sustainability of current economic models and what this means for our collective future.
It was truly enlightening for me to sit in the room with this investor group and learn more about their investment philosophies, histories, approaches, priorities and challenges. And it was nothing short of an epiphany for me to realise that these investors – through Family Offices and other similar vehicles – are in fact a critical piece of the global development puzzle, and not dissimilar to institutional investors in many ways.
UHNWIs act, in essence, as asset owners in their own right – some of them holding greater AUM values than many African institutional investors. They have the same, if not greater and in some cases more direct influence over the investment chain, able to set the mandate for entire markets. And they can do this without having to overcome the bureaucratic, policy and regulatory hurdles faced by institutional investors. It is possible that these investors may be in a position to catalyse growth and development at a greater scale (geographically and economically) and at an accelerated pace, compared to institutional investors – all without compromising their core mandate of maximising long-term returns. In short, Family Offices have the potential to substantially affect the investment practices of entire markets – to make them more sustainable and responsible. All they need to do is to make the decision to do so.
In the conversations that took place at the Summit, the concept of a legacy was raised a number of times. From my perspective, there can be no better, no more impactful legacy for a Family Office to leave, than that of a market that is forever altered for the better and consistently pushed to improve because of the standards of investment that this Family Office enforces. The legacy of responsible investment in this context would be one of generating investment return in a way that allows investors – of this generation and the next – to sleep soundly at night, secure in the knowledge that every dollar earned is one itself invested in generating the next, and the next, in a virtuous cycle of growth and consequent development across markets (which in itself creates ever more opportunity for investment, growth and development).
In this context, the challenge to myself, and to PRI, is to investigate how best to harness this incredible lever for change. The challenge to Family Offices in Africa – and elsewhere – is to consider the legacy they wish to leave behind, and then to invest their wealth in a way that will make that legacy a reality.
About the author
In her role of Head of Africa & Middle East of the PRI, Nicole’s focus is on identifying and addressing the needs of African investors with respect to integrating ESG into investment processes in an effort to foster the maximisation of long-term sustainable financial returns across the continent.
Prior to PRI, as a Development Economist, Nicole’s career has focused on supporting local and international organisations across the public and private sector in the design and implementation of strategies aimed at achieving large-scale developmental impact in Africa.
About the PRI
The PRI is the world’s leading proponent of responsible investment.
It works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.
The PRI is truly independent. It encourages investors to use responsible investment to enhance returns and better manage risks, but does not operate for its own profit; it engages with global policymakers but is not associated with any government; it is supported by, but not part of, the United Nations.
For more information, feel free to check out www.unpri.org