ethical investing shines in africa as economy grows

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  • 8/8/2019 Ethical Investing Shines in Africa as Economy Grows

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    Ethical Investing Shines in Africa as Economy Grows

    By Ron Robins, Founder & Analyst, Investing for the Soul

    Blog Enlightened Economics; twitter

    First published June 18, 2010, in his weekly economics and finance column atalrroya.com

    A new light in African ethical investing was shone on the plateau continent June 9,

    2010. Called AfricaSIF, [it] is designed to be a pan-African knowledge base,network and advocate for integrating ESG [environmental, social and governance]

    factors into investment in Africa. Based in South Africa, this non-profit organizationhas the support and partnership of the Wests heavyweights of ethical and socially

    responsible investing (SRI). These include Americas Social Investment Forum (SIF),Britains U.K. Social Investment Forum (UKSIF), E.Us Eurosif, and Canadas Social

    Investment Organization (SIO).

    African interest in ethical investing is evidenced by the launching in recent years of

    ethical-socially responsible investing (SRI) indexes and funds. These include theJohannesburg Stock Exchanges (JSE) SRI index in South Africa, and Africa investors(Ai) SRI 50 and SRI 30 indexes. Egypt has the MENA ESG index while Mauritius has

    the Africa Sustainability Fund and Ghana its ARK Mutual Fund.

    These developments are great news for ethical and conventional investors who maylike to invest in Africa.

    For the past several decades, and with the arrival of the financial crises two years

    ago, ethical investing has been gaining ground globally. In the U.S. the SIFestimates that one in every nine dollars invested is through an ethical or ESG screen

    of some kind.

    There are many styles of ethical investing and all with the same basic theme:applying personal values to investing decisions. Variations include socially

    responsible investing, responsible investing, sustainable investing, and impactinvesting.

    Most long-term studies generally agree that there are no significant differences in

    investment returns between ethically oriented portfolios and conventional ones.Some studies show that you may do even better by applying personal values to

    investing.

    In fact with the investment world demonstrating rising concerns over ethics, and,

    increasingly incorporating ESG factors into investment decisions, returns on ethical

    investments may outperform in the decades ahead. For comprehensive informationon ethical investing visit my globally popular site http://investingforthesoul.com/. (I

    have been following ethical investing for forty years).

    Ethical investing likely began to be introduced to Africans when western institutions,funds, and companies boycotted the South African apartheid regime in the 1970s

    and 1980s. A set of principles, the Sullivan Principles, created a code of conduct forcompanies operating in South Africa. It is probable that these ethical actions played

    a significant role in bringing down the apartheid regime and laying the foundation for

    http://investingforthesoul.com/http://enlightenedeconomics.wordpress.com/http://twitter.com/#!/ron_robinshttp://english.alrroya.com/editors?auth=Ron+Robinshttp://investingforthesoul.com/http://investingforthesoul.com/http://enlightenedeconomics.wordpress.com/http://twitter.com/#!/ron_robinshttp://english.alrroya.com/editors?auth=Ron+Robinshttp://investingforthesoul.com/
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    South Africas comparative leadership in ethical investing.

    Among emerging countries, South Africa has been a global pioneer in SRI and ethicalinvesting. The JSE was the first stock exchange in the world to launch an SRI index.

    The Index provider FTSE together with the JSE also pioneered an Islamic indexcreating the FTSE/JSE Shariah All Share Index. The JSE further leads as one of the

    worlds first stock exchanges to be a signatory to the United Nations Principles ofResponsible Investment (UNPRI).

    However, ethical investing is still in its infancy in South Africa, comprising about one

    per cent of the value of all investment portfolios in the countrywhich total aroundR2.5 trillion (about $320 billion).

    But as the founding of AfricaSIF indicates, ethical investing is beginning to blossom

    in the country. Another reason for optimism concerning ethical investing in SouthAfrica is that ethics and social justice are ranked highly in the South African

    corporate community. Quoting a 2008 report by the University of Pretorias Centre

    for Business and Professional Ethics (CBPE), the majority of companies on theJohannesburg Securities Exchange are ethically conscious and report on the ethical

    climate within their organizations [the report] focused on 55 Socially ResponsibleInvestment (SRI) companies listed on the JSE Further, all companies in SouthAfrica listed on the JSE are urged [actually required] to submit their annual and

    sustainability reports detailing their corporate governance practices such ascompliance with ethical standards, codes, policies and practices.

    Thus among emerging countries South Africa leads in corporate social responsibility

    (CSR) reporting practices. In December 2009 a report, Corporate SustainabilityDisclosure in Emerging Markets, authored by the Emerging Markets Disclosure

    Project (EMDP) of the SIF, remarked, Companies from South Africa exhibited thebest overall transparency practices, while firms from China, India, Indonesia, and

    Mexico, lagged. South African companies led in another CSR reporting study by

    SIRAN in March 2009 too.

    Africa has one billion people, thirty million square kilometres of land, is endowed with

    vast natural resources, and an economy likely at a take-off stage similar to Asia twodecades ago. Between 2002 and 2007 pan African growth was over 5 per cent

    annually. Companies from China, India, and many other countries are investingheavily in Africa.

    Foreign direct investment flowing into Africa, relative to GDP, is almost as large as

    that flowing into China according to the McKinsey Quarterly June 2010 report. Thereport adds, [T]he annual flow of foreign direct investment (FDI) into Africa in

    2008 increased to $62 billion, from $9 billion in 2000.

    At this stage Africa potentially represents a great opportunity for investors of allshades. Key areas of interest to investors wanting to both profit and invest ethically

    include companies and projects related to climate-change issues, water purificationand sanitation, and the agriculture and extractive industries.

    With twenty stock exchanges and the increasing quality of CSR reporting, investing

    in Africa will become increasingly more comfortable for ethical investors.

    Just as the worlds attention focused on FIFAs World Cup in South Africa, there is

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    global attention to a new economic dawn for all Africa. With the advent of AfricaSIFand the development of CSR throughout the continent, we will be increasingly able to

    apply our personal, ethical, or moral values to African investments. We can therebyachieve both profits and the personal satisfaction of helping the poorest continent on

    earth rise above its old darkness and transition to a sunnier future.

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