SA companies spent R10.7 billion on CSI in 2020
South African companies spent an estimated R10,7 billion on corporate social investment (CSI) in the 2020 financial year.
This represents a marginal 1,2% growth in real terms from R10,2 billion in 2019, according to CSI consultancy Trialogue. The research was published in the Trialogue Business in Society Handbook. It reflects the 23rd consecutive year of fact-finding into the state of local CSI.
Trialogue Director Cathy Duff said: “CSI expenditure in real terms has not shown a consistent trend since a period of growth between 1998 and 2013. Although we see a slight increase in 2020, we expect that as the economy contracts, so too will CSI expenditure, which generally lags GDP growth.”
CSI expenditure remained concentrated, said Duff. The top 100 companies (by CSI spend) accounted for 69%, or R7,4 billion, of total CSI expenditure. Of this R7,4 billion, almost two-thirds was spent by the 20 companies whose CSI expenditure was more than R100 million in 2020.
Companies that donated the most operated in basic resources (mining, water and forestry), retail – boosted by product donations ‒ and financial services. Together, these three sectors accounted for nearly two-thirds of CSI spend.
Non-cash giving (products, services, time) constituted 16% of total CSI allocation.
Response to Covid-19
Almost all companies focused on the health and safety of their staff (99%) and customers (83%) in their response to Covid-19. Fewer (40%) offered support to suppliers.
At least four out of five companies donated to Covid-19-specific responses, with most supporting interventions in food security (64%), healthcare (60%), and in the form of contributions to the Solidarity Fund (60%). Two-thirds took part in multi-stakeholder responses such as government dialogues and industry initiatives.
The reported impact of Covid-19 on CSI spend was mixed. Almost equal numbers of companies reported increased expenditure (26%), no change in expenditure (21%) or reduced expenditure (21%).
Several companies (13%) reported that expenditure remained the same but was redirected to respond to Covid-19. Only 4% of companies ceased or put all CSI funding on hold.
Causes and geographies supported
As in previous years, education was the most popular cause, supported by 95% of companies and receiving half of all CSI expenditure, said Duff. Social and community development remained the second most supported sector, followed by health, then food security and agriculture. Disaster relief received a relatively small percentage of CSI spend, but many more companies contributed to it this year.
“Corporates supported projects across an average 4,6 sectors, broadly consistent with previous years. This figure is significantly higher than United States companies, which are more focused and supported projects in an average 1,4 sectors in 2017.”
Over half of CSI spend (54%) was allocated to projects with a national footprint. Gauteng was the most supported province in 2020 (48% of companies directed funding to operations in the province, which received on average 19% of companies’ CSI expenditure.) This was followed by KwaZulu-Natal (supported by 35% of companies) and the Western Cape (supported by 28% of companies.)
In line with previous years, non-profit organisations (NPOs) were the main recipients of CSI funding. Over 90% of companies directed an average 54% of their spend to NPOs.
The next most common recipients were government institutions such as universities, schools, clinics and hospitals. These were funded by 69% of corporates and received on average 25% of companies’ CSI spend.
One out of five companies funded social enterprises, which aim to maximise profits while maximising benefits to society and the environment. This, however, amounted to only a small percentage (2%) of average company CSI spend.
Rationale and strategy
“The majority of companies (81%) rated ‘moral imperative’ as one of their top three reasons for supporting CSI, with 53% rating it as the top reason. This is consistent with previous years,” said Duff.
More than half of companies undertook CSI because of licence-to-operate obligations other than BBBEE, although only 11% ranked this as their top reason,
Reputational benefits, which ranked second in 2017, were rated lower this year. Only 35% of companies reported reputational benefits as one of their top three reasons for supporting CSI.
Impact of weak economy
Discussing trends in local CSI, Duff noted that net profit after tax (NPAT) of the 194 listed companies analysed showed a median decline of 12,7% in 2020, reflecting the weak state of the economy.
“CSI budgets are often determined as a percentage of NPAT and are based on the financial performance of the previous year. This results in a lag between current NPAT performance and budgeted CSI spend.
“Declining corporate profitability is expected to have a negative impact on future CSI budgets, although the extraordinary contributions to Covid-19 relief programmes in 2020/21 may delay the downturn in CSI spending.”
To read more: The Handbook can be downloaded free https://trialogue.co.za/publications/.
As in previous years, the Trialogue Business in Society Handbook is noted not only for its in-depth research but also for its expert contributions and striking design. This year, images from The Lockdown Collection appear on the front cover and throughout the edition. The Lockdown Collection is an art initiative founded this year to capture South Africa’s Covid-19 lockdown and to support vulnerable artists.View more
Taking stock of Covid-19 through a sustainability lens
If you are reading this, you are well on your way towards surviving one of the most cataclysmic events of our lifetime; one that is forever going to reshape the way we view the world and drive home the importance of prioritising sustainability and all it entails during the years ahead.
The coronavirus, which originated in a wet market in Wuhan, China, in December 2019, has since been declared a global pandemic that has spread across the planet through international travel and global supply chains. At the time of writing, the number of cases worldwide was inching towards the 54-million mark. Additionally, the effects of the virus have reverberated through global financial markets and economies, resulting in the greatest recession since World War II.
The pandemic has also brought to bear the severity of socio-economic inequalities, risks introduced by our unsustainable systems as well as the materiality of fat-tail events. In so doing, it has provided us with an opportunity to redefine a new normal and introduce structural shifts that will help us work towards a sustainable future for all.
Many countries instituted national lockdowns at an early stage in the pandemic, which is a classic example of a suppression approach to pandemic management. The logic underpinning this methodology is to introduce social distancing to entire populations and minimise the number of additional infections reproduced by each confirmed case, thereby slowing the spread. This, ceteris paribus, is a highly effective public health risk management plan. However, in reality all other things are not, in fact, equal. Thus, the coronavirus has brought crucial attention to the social element of environmental, social and governance (ESG) issues.
National lockdowns entail the suspension of economic activity, which results in loss of income and employment, pushing the vulnerable segments of society, already on the precipice of poverty, into a state of destitution. Also, countries encumbered by acute socio-economic inequalities, like South Africa, have had to face the reality that large segments of their populations living in high population density areas and with inadequate access to clean water and sanitation would face a higher risk of exposure to Covid-19. The reality of the plethora of social risks has since powered the rollout of unprecedented global fiscal stimulus packages to soften the adverse economic effects of the pandemic.
Although these packages have provided the buoyancy required to see us through the immediate challenges, a fundamental shift in the discourse surrounding the risks fragile economic structures pose is translating into the development of a far more robust and well-defined path towards a sustainable future.
Consequently, sustainable investing will be a vital component of a post-pandemic recovery. For instance, there has been an increase in the global issuance of social and sustainability bonds over the past five years. New issuances in response to Covid-19 are also coming to market. A guidance note has been published by the International Capital Markets Association (ICMA) to provide a benchmark for the structuring and reporting standards associated with the new Covid-19 social bonds.
Domestically, the South African Minister of Finance announced plans to amend Regulation 28 of the Pension Funds Act to improve the ease with which retirement funds can finance infrastructure projects to help kickstart economic development.
Companies adapting to change
Specific sectors and individual firms have been impacted in varying ways by the pandemic. When governments instituted lockdown laws, the spotlight turned to company governance practices and how executives would navigate the crisis.
Corporate boards faced scrutiny from various stakeholder groups that challenged the shareholder-centric model of governance, thereby making the board decision-making process much more multi-faceted. Companies became more cognisant of the central role they play in maintaining the socio-economic well-being of society through sustained value-creation. They also recognised how a well-functioning society puts them in a better position to meet their key performance indicator targets.
As a result, many boards decided to suspend or reduce their dividends and bonuses due to uncertainty regarding the scope and duration of the crisis. From an environmental perspective, working from home policies shed light on the environmental impact of commuting workforces. According to the International Energy Agency, a record drop in emissions is expected for 2020, with a projected 7% decline in energy-related CO2 emissions relative to 2019. Cities across the world have experienced lower smog levels, reduced water pollution and restored biodiversity highlighting the benefits of working remotely.
As such, many companies, like Microsoft, have implemented these policies permanently. Research also shows that infectious disease transmission is precipitated by rising temperatures, loss of biodiversity and other elements of climate change. By acknowledging this interconnectedness, global corporations are now playing a pivotal role in mitigating climate change risks.
Another equally crucial indirect consequence of the pandemic is the shift in focus to the social component of the traditional business model. Corporate culture measures such as employee health and safety and labour practices, including paid sick leave, have become priority areas and subject to intense public scrutiny.
Furthermore, severe supply challenges have also highlighted the risks of globalisation, and many companies have since amended their supply chain management processes to better diversify suppliers and reshore production. These social developments will not only improve working conditions but foster job creation and enterprise development.
Investor awareness on the rise
In light of the pandemic and growing public awareness of the climate crisis, investors across the world are shifting from a morally agnostic investment approach to one that aligns with their ethical concerns. This is evidenced in budding investor appetite for sustainable products, which has resulted in record-breaking flows into ESG funds in 2020.
Companies with strong ESG profiles have shown resilience in this time of crisis by staging a strong recovery post the March market lows.
This has prompted investors to rethink the impact ESG considerations may have on their investment returns. As supporting evidence, the MSCI World ESG Leaders Index has delivered returns in line with the MSCI World Index within a tight tracking error, other than its marginal outperformance in the wake of the March 2020 crash. This is a comforting return profile for the passive but ethically driven, investor.
Sustainable practices, such as strong incident risk management, fair labour practices, stakeholder-conscious boards, and clear decarbonisation pathways, have proven to be factors that drive long-term sustainable returns. To this end, we should witness an acceleration in the incorporation of ESG considerations into traditional valuation and risk models.
Forging a path forward
The turbulence caused by the pandemic and its indirect consequences has emphasised the need for global social change, multi-stakeholder centric business models, and international cooperation on public health and climate change considerations. This provides us with the carte blanche to rebuild a sustainable future for all and a resilient global financial ecosystem. The question is, which side of history do you, as an investor, want to be on?View more
ESG: vital for robust investment strategies
Growing investor awareness and the willingness to engage in issues related to sustainability, combined with the increasingly vivid positive relationship between sustainable practices and financial performance, have cemented ESG considerations as an integral part of any robust investment strategy.
|According to data from Morningstar Direct, more than $10 billion of assets in the US have been directed towards investing in sustainable funds during the first quarter of 2020 alone. These record-setting levels of flows underscore the growing significance of Environmental, Social and Governance (ESG) considerations when making investment decisions. Growing investor awareness and the willingness to engage in issues related to sustainability, combined with the increasingly vivid positive relationship between sustainable practices and financial performance, have cemented ESG considerations as an integral part of any robust investment strategy. |
At Prescient Investment Management, our investment philosophy is capital preservation and the pragmatic management of funds. We systematically take on only those risks that have proven to deliver commensurate returns over time. We adopt a holistic and integrated approach to our investment considerations, ensuring that we deploy our clients’ capital in a manner that promotes sustainability.
We have embedded ESG integration into our investment process; our product development, the suite of ESG-centric products we offer, and our corporate culture. Prescient follow rules-based security selection and portfolio construction methods that are designed to capture excess returns by investing in those factors (sometimes referred to as smart-beta) that are proven to provide positive payoffs in the long term. Common examples of such factors are Value, Low Volatility, Quality and Momentum.
The recent proliferation of ESG as an undeniable driver of return. the consistent debunking of the historically held perception of an inverse relationship between financial returns and sustainability has made it clear that ESG can also be added to the list. We have developed a systematic and data-driven in-house ESG risk-analysis tool that evaluates and scores listed securities based on their ESG risks and opportunities.
The Prescient ESG scorecard consists of three pillars, namely: Environmental, Social and Governance. It considers material themes such as (but not limited to) diversity, board structure, emissions and energy consumption by appropriately selecting and categorising over sixty underlying metrics. This fully automated and rules-based scorecard accounts for industry materiality and company size biases and provides a granular and in-depth measure of the proficiency of the governance practices as well as the environmental and social impact of our holdings.
At a product development level, the Prescient Clean Energy and Infrastructure Debt Fund has been specifically designed to encompass our sustainable investing philosophy and impactfully deliver on our ESG targets. It participates directly at the project level of the Renewable Energy Independent Power Producer Procurement (REIPPP) Programme. The Fund seeks to invest in clean energy and other infrastructure projects that will have a positive social and environmental impact. The target is to build a well-diversified portfolio of infrastructure investments that will improve the sustainability of our energy supply and provide the infrastructure that is vital for the development of South Africa.
We strive to uphold and incorporate the same ESG values and principles that frame our product development and investment process at our corporate level. As South Africa’s largest black-empowered asset manager, we deem transformation and Broad-Based Black Economic Empowerment to be paramount in achieving economic inclusion and a sustainable business topography in the country. We take sustainability considerations into account when allocating brokerage services, for example, as well as in any of our enterprise development undertakings.
We remain sensitive to the fact that our country is encumbered by an array of socio-economic challenges, as is reflected by our high levels of inequality and unemployment. As a corporate response, the Prescient Foundation embarks on various projects and social upliftment initiatives to address the social issues that face many South Africans.
8 Tips to Scale-Up Your Start-Up
From start-up to scale-up perfectly describes our journey at Von Seidels.
With high hopes for the African continent and loads of energy, Von Seidels was established in 2007 as a boutique IP firm and has grown into the pan-African law firm that it is today.
We perfectly understand the journey from “start-up to scale-up” with all the highs and lows, effort, challenges and celebrations along the way. With that being the theme of the 2020 SA Innovation Summit, we are thrilled to be the IP partner of this huge African innovation event and community this year.
For those starting on this journey now, we have 8 practical tips to share.
1. Be original
Before you start moving forward with your business idea, check that someone else is not already doing it for your target market and location.
2. Test the water.
Test your business name and product/service idea with your friends, family and would-be market to see if it has traction.
3. Build your village.
Like with raising a child, you need a village for support including your co-founders or partners, mentors and other entrepreneurs.
4. Be happy public speaking.
Sharing your business idea and purpose convincingly and comfortably is crucial. Think about and craft your ‘elevator pitch’ to explain your business in a nutshell to someone quickly, say, in a 30 second elevator ride.
5. Go free.
There are many free tools and services to use in the early stages, for example, to register your company, open your bank account and for marketing.
Google’s range of apps is free including Gmail, spreadsheets, documents and slides. When you are ready to market your business, use free tools such as MailChimp for email marketing and Zoho, Hubspot and Insightly for customer relationship management. Wix is one of the most popular free website building tools and you can use Google Analytics to track website traffic. And of course, social media is free and effective for getting visibility to a massive online audience.
6. Get scalable systems.
Invest in reliable, scalable systems from the beginning as you will need these to expand with your business. Many systems and software tools have free or low cost versions for start-ups which you can easily upgrade and add functionality to as you grow.
7. Get protected.
Protecting your IP is essential. Trademarks, copyrights, designs, patents, know-how, trade secrets, domain names, image rights, data and privacy policies are all forms of IP that can be protected.
8. Record agreements.
Set up a clear, legally-sound agreement with your co-founders/partners first. Draw up confidentiality and non-disclosure agreements (NDAs)
and invention assignment agreements. Once you have employees or instruct freelancers, ensure they sign these.
Also remember that agreements can be contained in an email chain. It’s also wise to confirm your understanding of all conversations with a follow up email.View more