How does responsible investing fit into your client’s portfolio?

Responsible investing is part of the core belief at Momentum Investments. Mike Adsetts, deputy chief investment officer at Momentum Investments explains what it means to follow an integrated responsible investing approach.

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Momentum Investments invests in several renewable energy projects covering wind and solar. Our investment in Ilangalethu Karoshoek Solar CSP 1 (above) is one of those investments.

Responsible investing is increasingly becoming a popular topic. Responsible investing is an approach to investing that aims to incorporate environmental, social and governance (ESG) factors into investment decisions. Although it has been around for a long time, responsible investing has really only been pushed to the fore the past couple of years.

The impact of the COVID-19 pandemic as well as the manifestations of climate change have focused people’s minds on the interconnectedness of all, as well as how our actions affect the environment. In the investment world, we believe it is our responsibility to influence the environment and society in a positive way by deciding how we allocate capital.

At Momentum Investments, responsible investing is part of our core belief. Sustainable and responsible investment practices are material factors underpinning our long-term success, and we follow an integrated responsible investing approach.

But what is an integrated responsible investing approach? It means that when you think about investments and investment management, you consider your investment decisions through the lens of responsible investing.

Components of responsible investing

One component of responsible investing is governance. For example, when you want to invest in state-owned enterprises and consider the investment decision, you must ask yourself whether the governance standards of the organisation are acceptable.

The environment is another component of responsible investing. If you want to support renewable energy, for example, you would look for initiatives involving this theme and investigate if these initiatives are accepted from an investment thesis perspective.

The integration of responsible investing means embedding the philosophies and the principles into the investment decision-making framework itself. When you make the decision of whether to invest or not, the responsible investment aspects are also considered.

The integration of responsible investing means embedding the philosophies and the principles into the investment decision-making framework itself.

There are different mechanisms and ways in which you can implement responsible investing. However, when breaking down responsible investments into the three pillars – environmental, social and governance factors – it is worthwhile to remember that they can contradict each other.

Mike Adsetts, deputy chief investment officer at Momentum Investments

South Africa is a case in point. We need to balance the social aspects, including inequality and poverty, with the need to move to a greener economy without leaving vast sections of the local population behind. If you consider the environment as a filter for investing, it could have negative implications on the social factor if you support renewable energy at the expense of traditional forms of energy production, such as coal mining, where entire communities depend on that industry for their very survival. A balanced approach is essential.

There are often trade-offs between both the different ESG factors and the investment thesis and what you are trying to achieve from a responsible investment perspective.

Our primary focus

At Momentum Investments, our primary focus is on delivering returns and sound investment performance for our clients. As an additional layer, we then look at what we can do to also align the intent and purpose with the responsible investment perspective.

Momentum Investments invests in several renewable energy projects covering wind and solar. Our investment in Ilangalethu Karoshoek Solar CSP 1 is one of those investments. Investing is personal and being part of a sustainable future means so much more than making good investment choices. It means more than just making sure our clients have their best possible financial future. It means making responsible choices that help build a sustainable future for all and for future generations. Nothing is more personal than that.

Click here to watch the video on Ilangalethu Karoshoek Solar CSP 1

At Momentum Investments, our primary objective is to deliver credible returns for our clients in a well-constructed and risk-diversified manner. When doing this, we consider how we can drive purpose and take advantage of the investment opportunities to create a better future for our investors, their communities and society.

Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406)