Africa is ready. Africa has 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 teeming with young people who are eager to develop it into a valuable, diverse, global leader. 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.
Likewise, while some African countries and companies are amongst the fastest-growing in the world, their attitudes towards Environmental, Social and Governance (ESG) imperatives have not developed at quite the same pace.
The continent is nevertheless in an enviable position in one important respect: 60% of the population is under the age of 25, and 41% is younger than 15. This is significant because attitudes towards ESG principles are often driven by younger generations, who want to run, work for and invest in businesses that have an ostensible “purpose.”
Investors are seeking 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. These are the businesses most likely to succeed, in Africa and elsewhere in the world.
What is the World Economic Forum’s Sustainable Development Impact summit?
It’s an annual meeting featuring top examples of public-private cooperation and Fourth Industrial Revolution technologies being used to develop the sustainable development agenda.
It runs alongside the United Nations General Assembly, which this year features a one-day climate summit. This is timely given rising public fears – and citizen action – over weather conditions, pollution, ocean health and dwindling wildlife. It also reflects the understanding of the growing business case for action.
The UN’s Strategic Development Goals and the Paris Agreement provide the architecture for resolving many of these challenges. But to achieve this, we need to change the patterns of production, operation and consumption.
The World Economic Forum’s work is key, with the summit offering the opportunity to debate, discuss and engage on these issues at a global policy level.
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 clarity to drive robust decision-making for both foreign and local investors.
There are multiple examples across the continent of individuals identifying problems and developing solutions in their communities – from solar panels that provide lighting at night, to mobile payment systems allowing employers to pay employees directly and people to send money to 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 also to build profitable businesses. But the challenge is not only about today’s problems and today’s solutions; it is also about the problems of tomorrow – and in particular, sustainability.
Publicly available data on African companies shows Africa still has a long way to go in terms of managing resources in a sustainable way, developing management models that recognize the value of all members of the workforce and developing business models that keep Africans accountable to their principles 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.
Financing Sustainable Development
The world’s economies are already absorbing the costs of climate change and a “business as usual” approach that is obsolete. Both scientific evidence and the dislocation of people are highlighting the urgent need to create a sustainable, inclusive and climate-resilient future.
This will require no less than a transformation of our current economic model into one that generates long-term value by balancing natural, social, human and financial conditions. Cooperation between different stakeholders will be vital to developing the innovative strategies, partnerships and markets that will drive this transformation and allow us to raise the trillions of dollars in investments that are needed.
To tackle these challenges, Financing Sustainable Development is one of the four focus areas at the World Economic Forum's 2019 Sustainable Development Impact summit. A range of sessions will spotlight the innovative financial models, pioneering solutions and scalable best practices that can mobilize capital for the the world's sustainable development goals. It will focus on the conditions that both public and private institutions should create to enable large-scale financing of sustainable development. It will also explore the role that governments, corporations, investors, philanthropists and consumers could play to deliver new ways of financing sustainable development.
As investors seek better sustainable investments, they are looking to identify tangible, comparable, factual, data-driven evidence to drive 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 to enable measurable action. Our customers make informed investment decisions, drive growth and mitigate ESG risks through our Sustainable Leadership Monitor (SLM), a collection of indices and benchmarks. Since late 2016, we have been collaborating with the World Economic Forum and a group of partners to develop the SLM, providing an agreed framework and measurement for sustainable long-term leadership and investment.
Data in our SLM also allows companies to benchmark themselves against 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.
This not only helps companies modify and measure their behaviour, but it is also 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.
Measuring and monitoring this requires the transparency provided by ESG data tools able to deliver consistent and relevant information across countries and companies. It’s the best way to identify companies with long-term sustainable growth strategies.
In addition to sustainable leadership, companies need to put eco-friendly methods into practice. Another Refinitiv study analysing data from our ESG database found 63% of companies have a policy to reduce carbon emissions and 63% are recycling. In terms of water efficiency, there has been a 25% increase in companies formulating policies between 2014 and 2019, while 34% of companies have set goals. These policies 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 well-being of employees and the prospects of future generations – while 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.