Values-based investing means investing in a way that reflects and upholds your personal philosophy and beliefs, this include focusing on certain investment opportunities that align with your world view and avoiding others that do not, mostly inclining towards those that have positive impact and best practices with respect to sustainability. Some refer to this type of investing also as SRI – Socially Responsible Investing, Impact Investing, Ethical Investing and even more recently, interests have steered towards what is called ESG Investing – Environment, Social and Governance Investing.
Over the past decade, investors and particularly millennials, have gotten serious about socially impactful and responsible investing, they and others are asking a serious question: What investments help me build wealth and have positive social impact, are environmentally responsible and uphold best governance practices?
In Africa, there are more opportunities to make a positive environmental and social impact than any other region of the world; the challenge isn’t getting more investors to embrace the concept of ‘responsible investing.’ The awareness is already growing with institutional investors; However, with individual investors, the same level of acceptability is yet to be achieved, particularly with ‘older’ investors. Environmental, social, and governance (ESG) factors have become key considerations in investing in sub-Saharan Africa, according to Fitch ratings, this consideration is in line with sustainable development benchmarks. The COVID-19 pandemic and all of the extensive aftershocks have put a spotlight on the importance of ESG issues, and now more than ever individual investors, as well as the financial advisors that oversee the portfolios for these investors, are focusing a lot more on ESG issues
In recent times, there has been an increased focus on ESG in various countries. Investors are increasingly recognising the link between ESG performance, wealth generation, and risk mitigation. In Nigeria, the Financial Reporting Council (FRC) issued the Nigerian Code of Corporate Governance (NCCG) in 2018, with Principle 26 aimed at improving sustainability. All organisations are required to duly pay attention to sustainability factors these include environmental, social, health and safety to ensure the long term future of the organization while contributing to the social and economic growth of the community where they conduct their business.
The interests for socially responsible investing is set to grow. According to research conducted by FactSet (2019) which still holds sway today, globally, almost 70% of investors surveyed intend to increase their allocation to ethical investments in the next five years. This trend is being driven by Generation X (those between 35 and 54 years of age). One quarter of investors in this age bracket anticipate a significant increase in the social credentials of their portfolio and a further 46% expect marginal increases. Millennials have taken this focus one step further. Ninety percent want to grow their allocations to responsible investments.
A major shift is seen in the relationship between investors and their wealth / financial advisors. Now more than ever, HNWIs are demanding greater insight into where and how their wealth is being invested and they are looking to their advisors to guide them in making investments that align with their values.