Systematic investment firm Prescient Investment Management (PIM) has released its Responsible Investing Report for 2023, which shows the pivotal role of environmental, social and governance (ESG) as a risk management tool, affirming that recognising and integrating ESG considerations into investment practices are essential steps towards fostering long-term sustainability, PIM credit head Conway Williams says.

“The report underscores that viewing ESG through the lens of risk management is crucial, as it allows stakeholders to make informed decisions that align with both financial objectives and sustainable principles,” he emphasises.

“ESG is here to stay, but for ESG to enact meaningful change, however, the industry must make a collective effort – there should be a common assessment methodology: a framework that ensures ESG is rigorously evaluated and implemented across the investment spectrum in a standardised and consistent manner,” PIM ESG committee chairperson Michelle Green points out.

According to the report, the increasing relevance of ESG has considerably transformed how businesses and investors approach sustainability.

“In the past, ESG factors were often viewed as optional rather than integral components of corporate and investment considerations. Today, companies and investors are adopting a more holistic approach, embedding ESG factors into their strategic plans and decision-making processes.

There is evidence that ESG principles have a positive influence in generating long-term value in a business. Companies with robust environmental policies, strong social engagement and effective governance structures tend to outperform their peers in the long run,” the report states.

The report provides insight into the changing world of ESG frameworks, with industry participants posing queries around its applicability for investment decision-making. 

It unpacks the concepts of responsible investing, how PIM embeds ESG into its investment process and talks to PIM’s approach to sustainable investing.

It also references some of the key projects in which PIM has participated during 2023.

Aimed at both institutional and retail investors, as well as trustees and other stakeholders, the report offers key insights into navigating the realm of responsible investment, PIM says.

“We are cognisant of the global debate around ESG, and we believe it’s an incredibly important discussion. Too many people are simply equating ESG with ‘doing good,’ rather than recognising it as an integral part of a formal investment process,” Williams points out.

PIM developed its own responsible investment approach, which included a decision to build its own ESG methodology instead of adopting off-the-shelf products, using this proprietary approach across its investment universe, including its infrastructure debt funds.

The first is the Prescient Clean Energy and Infrastructure Debt Fund, which invests in initiatives that facilitate infrastructural, environmental and socioeconomic impact and development in Southern Africa.

To date this fund has deployed over R4-billion in 28 renewable energy projects and infrastructure opportunities.

The second is the Prescient Infrastructure Debt Fund that was launched in September 2021 and currently manages R1.6-billion in assets.

The offering follows a broad infrastructure mandate, giving investors access to generally inaccessible clean energy and infrastructure assets which offer returns uncorrelated to South African equity and capital markets, PIM posits.