Africa is ready. Africa contains some of the fastest growing companies in the world. Every region on the continent has something to offer, be it natural resources or human capital. The continent is blossoming, teaming with a rising youth population and eager to develop into a global leader with its valuable and diverse offering. But for many international investors, Africa still poses a risk.
Business models and structures have yet to implement sustainable values to ensure the security of global investment partners’ input as well as the empowerment of generations to come. While the talent is exponential in Africa, the systems and institutions need support.
While some African countries and companies are amongst the fastest growing in the world, their attitudes towards Environmental, Social, Governance (ESG) imperatives have not developed at quite the same pace.
The continent is nevertheless in an enviable position in one important respect. Sixty percent of its population is under the age of 25. Forty-one percent is younger than 15. This is significant because attitudes towards ESG principles are often driven by new generations, who want to run, work for and invest in businesses that have an ostensible "purpose". Investors therefore are seeking out businesses with long-term sustainable strategies.
These companies are rewarded for their approach by attracting the best talent and earning the greatest market share, thus setting the standards for others to follow. Just like elsewhere in the world, these are the businesses most likely to be successful in Africa.
The importance of ESG data is growing as investors set a high value on transparency, particularly in an environment where the opportunity is accompanied by higher degrees of uncertainty and even controversy.
In Africa, ESG data creates a window of clarity that can drive robust decision-making for both foreign and local investors. There are multiple examples across the African continent of individuals identifying problems in their community and developing solutions that have improved those communities.
From solar panels to provide lighting at night to mobile money payments allowing employers to pay employees directly and for people to send money to their loved ones in rural areas; given the tools to formulate solutions, Africans have the capacity and the will, not only to solve their problems, but to build profitable businesses while doing so. But the challenge is not only about today’s problems and today’s solutions; it is also about the problems of tomorrow – sustainability.
Publicly available data on African companies shows that Africa still has a long way to go in order to manage resources in a sustainable way, develop management models that recognise the value of all members of the workforce, and develop ways of doing business that keep Africans accountable to their principals as well as to their communities.
At Refinitiv, we are mapping the trend of increased sustainable leadership becoming increasingly central to developing sustainable investments. Our Wealth and Asset Management clients are demanding data on companies who track, measure, and report their non-financial operations in the most transparent way possible.
As investors seek better sustainable investments, they are looking to identify tangible, comparable, factual data-driven evidence to drive their investment decisions. The more African economies and companies prosper, the more critical it will be to manage resources in a responsible and sustainable way, to treat people fairly, and to track the impact of all non-financial operations and activities.
As a leading provider of financial markets data and infrastructure, Refinitiv helps over 40 000 customers become sustainable leaders by providing the data and tools necessary that enable measurable action – making their best informed investment decisions, driving growth, and mitigating ESG risks through our Sustainable Leadership Monitor (SLM), a collection of indices and benchmarks, and one of the richest ESG databases in the industry, with ESG data and scores covering over 7 000 global listed companies across 400+ ESG data points going back to fiscal year 2002.
Since late 2016, we have been collaborating with the WEF and a group of partners to develop the SLM, providing an agreed framework and measurement for sustainable long-term leadership and investment. We believe that by using independent and transparent data that is trusted by investors and corporates, as an industry, we can drive real, positive impact on a global scale.
Data in our SLM also allows companies to benchmark themselves against their peers. This enables them to focus on where they need to improve and to set necessary and attainable goals, thereby empowering corporate leaders to take informed action.
Not only does this help companies to modify and measure their behaviour, but it is vital for investors who are increasingly allocating capital based on ESG considerations. In a changing world, generating long term returns are dependent on leaders making sustainable decisions.
Being able to measure and monitor this requires the transparency provided by ESG data tools that are able to deliver consistent and relevant information across countries and companies.
That is the best way to gain the advantage of being able to identify those companies with long-term sustainable growth strategies. To be socially responsible, companies also need to be inclusive of women and recent findings by Refinitiv show that Africa, more specifically South Africa, has to invest more in having women in top management positions. 23.7% of board members in the country are female and the percentage drops when it comes to executive positions (20.3%), while, 31.5% of the managers are female.
Ideally, the percentage should increase as we go higher up in the hierarchy but that is not the case. More companies in Africa need to update their practices by reporting gender metrics as well as giving women an equal opportunity for top management positions. Africa needs to continue to invest in young women through education, entrepreneurship and most importantly, equal opportunity.
What is most encouraging is that it is clear that African companies can and will match the best in the world when it comes to ESG best practice. The 2018 Thomson Reuters Diversity & Inclusion (D&I) Index, shows four companies from South Africa are ranked in the top 100 for the most diverse workplaces in the world.
The index highlights companies that are leading the way in having a foundation of diversity and inclusion in their company strategy. The benefits see an investment into the business and most importantly, the community. The companies are Woolworths (top 25), Vodacom (top 50), Clicks Group, and Nedbank.
In addition to sustainable leadership, companies need to put into practice methods that are eco-friendly. A study done by Refinitiv found that 63% of the companies have a policy to reduce carbon emissions, and 63% are recycling. In terms of water efficiency, there has been a 25% increase of companies formulating policies between 2014 and 2019, plus 34% of companies have set goals.
The data was analysed from our ESG database. Aspects like these are attractive to conscious investors looking to develop Africa. Informed decisions based on data that has been thoroughly researched, well presented and analysed will assist in the growth of the African continent.
There is a new paradigm requiring the creation of long-term practices that respect the environment, the wellbeing of employees and the prospects of future generations - whilst still making money, improving profitability, funding innovation and achieving an increased market share. Through data, we have the opportunity to help shape positive investment for a stronger Africa.