Introduction

Our Approach

Our commitment to responsible investment is central to our investment objectives and to fulfilling our fiduciary duties towards our shareholders and beneficiaries. We believe that embedding environmental, social and governance (ESG) thinking into our investment decision-making is critical if we want to create positive futures and sustainable, superior, risk-adjusted returns for our clients. We have adopted an ESG and Impact Management Framework to achieve our vision of continual improvement in ESG performance.

We apply an equal focus on risk management and positive impact outcomes. We seek to deeply understand the tradeoffs posed by investments, being thoughtful in our investment decisions, purposefully acting to be part of the solution in facing global ESG challenges.

Values & Drivers

Our ESG approach is underpinned by the following objectives:

CREATION OF POSITIVE FUTURES

We want to create positive futures for those affected by our investments, resulting in improved living standards, education, housing, employment opportunities and stewardship of ecosystems in which we operate. To achieve this, we must move beyond a narrow focus on commercial/financial returns and proactively seek investment opportunities that create value through positive sustainability outcomes.

SUSTAINABLE, RISK-ADJUSTED RETURNS

We undertake a holistic risk management approach by integrating ESG into our investment process. We strive for sustainable returns – returns that are achievable over the longer term; and we calibrate risk-adjusted returns – returns that have predicted and built in the cost of managing ESG risk and delivering improved ESG performance.

GREEN ECONOMY

‘Green economic growth’ refers to an economic growth path that is profit-driven but also socially inclusive, resource efficient and low carbon. The term has been adopted globally as a counter-concept to traditional industrial economic growth, which focuses on increasing Gross Domestic Product above all other goals. We actively support investments into this Green Economy.

Negative vs Positive

Management of negative and positive potential impacts is equally important. Management of potential negative impacts from our investments is undertaken through our ESG risk management practices. Management of potential positive impacts is undertaken through our ESG value creation and positive impact practices. Both are managed throughout the investment lifecycle, with risk management (‘do no harm’) being the foundation of every investment. Each of our capabilities has a fit-for-purpose environmental and social management system (ESMS).

The ESMS is the system that drives the management of ESG risk and optimisation of positive impact. Impact measurement and management falls under the processes of the ESMS.

Four Focus Areas

To achieve meaningful, significant positive outcomes through our investment practices, OMAI has selected four key focus areas from a group-wide perspective. The four focus areas are:

Climate Change

Decent Work

Diversity

Governance

Under these broad focus areas, we find our asset classes provide opportunity for positive impact through the themes of energy, carbon, social aspects, infrastructure, housing, education and governance. We align these themes with specific United Nations Sustainable Development Goals. Our investment professionals understand that each of these themes are critical in every investment.

UN SDGs - The top-line goals to drive toward

The United Nations Sustainable Development Goals (SDGs) is a set of 17 goals which act as a successor to the Millennium Development Goals. These goals were adopted at the Sustainable Development Summit on 25-27 September 2015 in New York, and are now considered the primary global benchmark for institutions seeking to achieve sustainable development in their business, activities and investments. From a portfolio company perspective, ESG metrics and information can be mapped to the broad goals of an SDG.

We have assessed the 17 SDGs in the context of our current and likely future set of portfolio assets. Including the four key themes, we have selected those SDGs which we believe we are most likely able to influence in terms of outcomes across our broad portfolio and those that are also relevant within our context. Our guiding philosophy here has been to focus on where we can practically make a difference and consequently target our efforts in these areas. Within each of the SDG categories selected, we have chosen specific metrics that we believe can best guide our efforts in these areas.

Our investments are particularly aligned with the following SDGs:

AIIM also focusses on:

Impact funds also focusses on:

OMPE is specifically aligned on SDG 5, 8, 9, 10, 12 and 16 in the above list.

Standards and Guidelines

We are committed to implementing best ESG international practice appropriate for the nature of our investments. Standards and guidelines that we adhere to include:

  • Applicable country(s) ESG related legislation
  • United Nations Principles for Responsible Investment (signatory status)
  • United Nations Global Compact (participant status through Old Mutual Limited)
  • United Nations Guiding Principles on Business and Human Rights
  • United Nations Sustainable Development Goals
  • Equator Principles
  • International Finance Corporation Performance Standards
  • International Finance Corporation / World Bank EHS Guidelines
  • International Labour Organisation
  • Task Force on Climate-related Financial Disclosures (TCFD)
  • Sustainability Accounting Standards Board (SASB) Materiality
  • 2x Challenge
  • Institutional Limited Partners Association (ILPA) Diversity in Action
  • King IV Code for Corporate Governance

Impact Investing and other identified impact investments across OMAI adhere to the following impact investing related standards and guidelines:

  • United Nations Sustainable Development Goals Impact Framework
  • Global Impact Investing Network (GIIN) Framework (member status)
  • IFC Operating Principles for Impact Management (signatory status)

Approach to Impact Measurement

The adage of ‘you cannot manage what you don’t measure’ also holds true in the ESG and impact investing practice. Investments that claim to result in positive outcomes require credible, robust measurement to evidence such impact.

The IFC has identified three dominant frameworks adopted for impact ‘measurement’ frameworks which they refer to as archetypes. These include:

  • 1 Impact target archetype (actual measurement of defined metrics against a target/goal)
  • 2 Impact rating archetype (a qualitative assessment of the significance of the impact)
  • 3 Impact monetisation archetype (a quantitative calculation of the degree of impact)

It is critical to identify that there is a difference between ‘measurement’ and ‘rating’, and also that these are not mutually exclusive archetypes. Our primary approach is the impact target archetype. Measurement of relevant metrics is undertaken to assess progress or lack thereof.

To understand which metrics should be measured for positive impact, OMAI uses a Theory of Change approach. The Theory of Change explains the process of change that is expected to occur as a result of the activities that are implemented by the investment. It does this through outlining the change pathways toward a desired end impact, identifying the casual linkages along the pathways. We have mapped out Theories of Change at an asset class level for our impact investing activities.

OMAI also uses the dimensions of impact as defined by the Impact Management Project to establish the nature and extent of positive impact.

Our Environmental and Social Management System (ESMS)

We have developed and implemented an integrated ESMS as a robust and embedded approach to addressing environmental and social management requirements across our fund portfolios and a framework for more efficient and transparent ESG reporting to our stakeholders.

The ESMS is fit-for-purpose for each of our four capabilities; it is made up of a set of policies, procedures, tools and reporting guidance customised for the capability funds to help them identify, assess, manage and report on ESG risks associated with their assets and portfolio companies, and identify opportunities for positive impact. The ESMS is designed to fully integrate ESG into our investment lifecycle.

Overarching ESMS process for Competencies:

  • RAISE FUNDS/LP ENGAGEMENT

  • SCREENING INVESTMENTS

  • DUE DILIGENCE

  • DECISION MAKING AGREEMENTS

  • MANAGEMENT & MONITORING

  • EXIT

  • ES POLICY

  • ES SCREENING

  • ESDD

  • ES TERM SHEET CLAUSES

  • ES MONITORING TOOLS

  • ES VENDOR DD TOOLS

large separator line

OUTPUTS
KPIs

large separator line

AGGREGATED OMAI ANNUAL REPORTING & MONITORING

The ESMS allows us to:
  • • Integrate ESG issues directly into the investment decision-making processes;
  • • Set clear requirements for its portfolio companies to develop and implement ESG systems to ensure they can meet our ESG standards;
  • • Provide a framework for reporting and disclosure on ESG aspects to OMAI by our portfolio companies; and
  • • Work in partnership with our portfolio companies to help them identify and implement ESG opportunities and create sustainable value-add to enhance their overall financial performance.

OLDMUTUAL

About Alternative Investments

Old Mutual Alternative Investments (OMAI) is one of Africa’s largest private alternative investment managers in private equity, impact investing and infrastructure funds. Established in South Africa in 2000, OMAI is a member of the Old Mutual Group, founded in 1845.

More About Old Mutual Alternative Investments

Alternative Investments