Week 5: ESG in Africa 🌍

In this issue: ▸ If ESG is not for Africa, then who is it really for? ▸ Why are ESG investors so disengaged? ▸ Africa is ready for us ▸ A special place in my heart

Dear all,

I hope everyone is well and ready for new edition of ‘ESG on a Sunday’.

Last week we had a look at ESG developments in Asia, particularly in China.

This week we move on to Africa and take a good look at the recent ESG developments on this great continent (which has a special place in my heart).

If ESG is not for Africa, then who is it really for?

Africa deserves all our ESG attention, but it seldom gets any of it. And when it does, it’s often negative.

The current global ESG narrative is shaped in Europe (UK is still part of Europe) and partly in the US. It’s a narrative dominated by do’s and dont’s defined by wealthy western world institutions in their pursuit to justify and reinforce global soft power dominance over rights and wrongs in the world.

So when cobalt is extracted in Congo by mining companies as well as hundreds of thousands of poor people and their children, we declare a ban on all investments in this “dreadful” business. Yet mining companies in Africa are one of the biggest contributors to the revolution of EV solutions we are experiencing in the developed world.

Investments in, for example, cobalt mining companies in DR Congo is a no-go zone for “sustainable investors”, while investments in car, battery, tech and many other companies using this metal to produce low-emitting solutions is in many cases “very sustainable”. Here, you find green revenues, SDG contributors, and champions of circular business models.

Why are ESG investors so disengaged?

This leads to an interesting question: What is ESG investing really about?

Are the trillions of dollars invested in sustainable/ESG financial products not supposed to improve ESG conditions of nature/climate, people and systems affected by these investments?

Well, the current ESG investors don’t really have skin in the game in Africa since they don’t invest there. Engagement efforts with downstream sectors to “improve” their supply chains do not really make a tangible difference on the ground – and that is what we really need.

The best way for ESG investors to engage in Africa is to start investing in and spend time on the continent. We need to see Africa not as resource pool, but as engine for the global transition we need.  

Yes, there are enormous challenges in Africa – vast corruption, lack of rule of law, conflicts of various kinds and poverty beyond imagination. But the same can be said for many other nations in the world, even some European nations.

Today, we do “business” with Africa. We buy resources extracted in an unsustainable way and then we “process” them into sustainable products for our own markets. And then, finally, we buy that EV and it feels so “right”.

You should ask yourself if that EV, or that stock or fund you bought, really improves the life of African boys (aged as young as 6) who are working in a mines to help feed their families?

Can we change this? Of course we can. We put man on the moon. We can do magic.

But we as investors need to stop being so disengaged with those parts of the world and sectors where our investments can make the biggest difference.

Yes, it’s not easy, but it is possible.

Africa is ready for us

If you want to get a grip on the overall development of ESG in Africa and vast opportunities there, I suggest you read this article. 

Africa is ready. Africa has some of the fastest-growing companies in the world. Every region on the continent has something to offer, be it natural resources or human capital. The continent is teaming up with young people who are eager to develop it into a valuable, diverse, global leader.

But for many international investors, Africa still poses a risk. Business models and structures have yet to implement sustainable values to ensure the security of global investment partners’ input as well as the empowerment of generations to come. While the talent is exponential in Africa, the systems and institutions need support.

Likewise, while some African countries and companies are amongst the fastest-growing in the world, their attitudes towards ESG imperatives have not developed at quite the same pace.

Recommended reading on “ESG in Africa”

There are lots of topics and aspects related to ESG in Africa. Below are some other articles that I recommend for further reading:

• What should African resources-developers do to prepare for ESG? The natural resources industry has always been particularly exposed to ESG issues, particularly in Africa. In this article, the authors explore some key developments and suggest a framework for integrating ESG performance into corporate values, strategy and risk management.

• As mentioned in the beginning of this newsletter, African ESG is filled dilemmas. In this piece, Nina Röhrbeinn elaborates on the African ESG dilemmas.

• In this really good piece you get good overview of the developments in Sub-Saharan Africa and the Sustainable Investments done by IFC.

• COVID-19 has shifted ESG into a forefront of investments, and in Africa it makes a real difference. Here’s a short, but telling piece on how ESG is taking take centre stage in a post-pandemic Africa. 

• In this article you can read about ESG risks and sovereign debt in Africa – what it means and how it can be developed.

• It is “S” in ESG that dominates Africa, and this is why and how. Social issues hurt now, but not in 10 or 50 years.

Mother Africa has a special place in my heart

I have visited most parts of the African continent over the last 20 years. I have seen mines, desserts, rivers, sun and darkness, joy, pain and hope. I’ve met some of the nicest people in my life, and I’ve cried there more than anywhere else. But I’ve always returned to Africa with faith in my heart. We can do much better in Africa. 

As Mrs. Lauryn Hill sings, Everything Is Everything.

Have a nice week!

Best regards, Sasja