WHAT IS SRI?

Socially Responsible Investing (SRI), is the practice of investing money in companies and funds that have positive social impacts. It combines investment objectives and social concern such as social justice, economic development, peace or a healthy environment and is considered socially responsible due to its nature.
The primary focus of SRI in South Africa today, is the provision of basic services and infrastructure development. At COMANCO, we have three distinct categories of SRI that we consider throughout our investment-decision making process, namely target investing, screening and shareholder activism.

TARGETED INVESTING

Targeted Investing is cause-based and characterised by selecting investments that aim to achieve a particular objective. These are defined in the Financial Sector Charter as being debt financing of, or investment in, transformational infrastructure projects that support economic development in underdeveloped areas, and contribute towards equitable access to economic resources in the following sectors:
  • Low-income housing (household income levels of less than R1500/month)
  • Infrastructure (roads, dams, schools, bridges, hospitals, sewerage, water and electrification)
  • Agriculture (poor, black farmers)
  • Small, medium-sized and micro-enterprise financing

SCREENING

Screening can be divided into three categories: negative, positive and best-of-sector.
  • Negative screening: excludes companies producing ‘undesirable’ products or services, as well as those operating in ‘undesirable’ industries, such as the tobacco, alcohol, or arms manufacturing. Shari’ah (Islamic) investment principles are one such example of this approach.
  • Positive screening: seeks companies that are perceived to be good corporate citizens and that prioritise ESG issues.
  • Best-of-Sector screening: combines both positive and negative screening methods. This means that no one sector or industry is excluded outright, but the portfolio managers will seek to invest only in companies that demonstrate a commitment to being good corporate citizens that pay attention to their ESG impacts.

SHAREHOLDER ACTIVISM

The active engagement with investee company management on a range of ESG issues. This can be achieved through the use of voting rights at annual general meetings and direct dialogue. Companies that fail to respond may cause us to divest.