Avior ESG | Cross-industry thematic | Balancing decarbonisation and inclusive growth

Expectations of businesses are evolving. The defined role of an organisation is shifting from one where the sole purpose is to create “shareholder value” to one where an organisation creates “stakeholder value”. In recognition that “being good is good business”, we believe NED, DSY, RDF, SAP, TFG and CLS stand out as leaders in their respective industries based on an ESG opportunity set.

The world has hit a record high temperature in 2019. Climate change is affecting all layers of society and the impact of production and consumption on the environment can no longer be ignored. Global investors are divesting from fossil fuel investments at an increasing rate due to pressure from regulatory risks surrounding carbon emissions, policy changes, asset price changes, technology and consumer preferences. The IMF reported that cumulatively c.$10 trillion had been divested from fossil fuel intensive activities by Sep ‘19, up from zero in 2012.

Rising inequality poses a significant risk to the SA economy. In our view, credit has become a larger contributor of consumption growth in SA, inhibiting per capita wealth creation. Sustainably reducing inequality can only be done through job creation and education. We highlight commendable CSI initiatives to promote community well-being and education. However, SA's labour market is one of the most restrictive which affects efforts to reduce inequality. Disconcertingly, average executive remuneration is outpacing median employee wage growth according to our estimates.