Each week Emerging Markets ESG publishes an interview entitled, “Five Questions about SRI.” The interview features a practitioner’s insights about SRI in emerging markets and through Emerging Markets ESG shares this expertise with a wide global audience. The goals of Five Questions about SRI are fourfold:
- To collect a catalogue of examples of SRI in practice in emerging markets;
- To raise awareness about SRI in emerging markets;
- To reflect on what SRI in emerging markets means to practitioners; and
- To enable SRI practitioners in emerging markets to network with peers around the world.
This week’s interview is with Prakash Deenapanray, Director, ELIA – Ecological Living In Action Ltd., Mauritius.
ELIA – Ecological Living In Action Ltd. was created in 2006 by Anneloes Smitsman and is based in Mauritius. ELIA is a Learning Organisation and an eco-conscious business. As a Learning Organisation, ELIA invests in the ongoing learning and development of all its team members. As an eco-conscious business ELIA is different from what people tend to expect from companies. Leading with heart, courage and attunement to Life’s Wisdom is at the centre of its business practice. To support the shift to ecological sustainability ELIA provides services in the following key areas: Inner Growth, Eco-Literacy, Business Strategies for Corporate Sustainability, Systems Thinking, and Climate Change. It also offers consultancy services in Eco-Design. Its client base includes local communities, schools, businesses, individuals, governments and NGOs located in Mauritius and in the Africa-region. Prakash (Sanju) Deenapanray joined ELIA as Director in October 2010. He has worked in various fields in the capacity of researcher, project coordinator and consultant. He worked as an Australian Research Council Post-Doctoral Fellow from 2000 to 2004 researching novels ways to integrate optoelectronic and photonic devices. Between 2004 and 2006 he was a Fellow with the Centre for Sustainable Energy Systems at the ANU working in a team researching and developing a breakthrough technology to fabricate low-cost, high-efficiency, thin-film crystalline silicon solar cells. Sanju also carried out research using Synchrotron Radiation at facilities in Taiwan, France and South Korea. Furthermore, he carried out research at the Royal Institute of Technology, Kista, Stockholm. Upon his return to Mauritius in 2006 he worked as a Project Coordinator at the Mauritius Research Council. He worked for the UNDP between April 2008 and June 2010, where he was in charge of the national climate-change portfolio, as well as providing technical backstopping support to UNDP’s Regional CDM Capacity Development Programme in six Eastern and Southern African countries. He holds an Honours Degree in Engineering (Interdisciplinary Program) from the Australian National University (ANU); a MSc in Physics from the University of Pretoria (South Africa) a PhD in Semiconductor Physics / Electronic Materials Engineering from the ANU, and a MBA (Technology Management) from APESMA/Deakin University (Australia). He has published over 130 scientific papers in international journals, as well as several policy papers on various aspects of sustainable development and green economy.
Emerging Markets ESG: How would you define socially responsible investment (SRI)?
Prakash Deenapanray: We simply cannot apply a ‘one-size-fits-all’ definition of SRI! To appreciate this answer, it is good to have a look at the different levels of development across the South West Indian Ocean (SWIO) region. The SWIO region is arguably host to a group of most heterogeneous islands that one may encounter. There are huge economic disparities in terms of GDP per capita, with upper-middle-income countries such as Seychelles and Mauritius at above US$24,000 and US$15,000 in 2011 (IMF estimates), while other countries such as the Comoros and Madagascar have GDP per capita lower than US$1,250. At the other extreme, La Réunion as a Department of France has a GDP per capita above US$35,000, but is confronted by a very high and unsustainable unemployment rate at around 30% over the past years. Although GDP per capita can be a good indicator of absolute poverty, it often masks wealth distribution within countries (i.e. relative poverty). The Gini coefficient shows that while Comoros and Madagascar are among the poorest islands considered here, they are also the most unequal societies. Tanzania, Comoros and Madagascar have sizeable rural populations. So, it is not sensible to apply any specific definition of SRI across the region. What would be more useful is that all these islands strive towards sustainable development orientations – i.e. balancing the environmental, social and economic spheres of development – that need to be contextualized. For instance, poverty alleviation and achievement of the MDGs would be high priorities for Comoros and Madagascar. In fact, all the countries have taken measures to promote sustainable development, be it through the Grenelle de l’Environnement in La Reunion, or the Seychelles Sustainable Development Strategy in Seychelles, or Maurice Ile Durable to name but a few examples. All these examples aim at orienting both public and private investment for sustainable development, including for crating better societies.
Emerging Markets ESG: What distinguishes SRI from mainstream investment?
Prakash Deenapanray: It would be great to be able to say that SRI is mainstream investment across the entire SWIO region. But given the picture painted earlier, it would be erroneous to say so. In the poorer nations, there are big issues related to good governance that need to be addressed in order to have socially-responsible public investment (since the state is a large investor). However, in the other more developed islands, it is inconceivable today (and certainly not without public outcry) not to have SRI as mainstream, because of high-level political support for sustainable development and emancipated populations who are aware and increasingly vocal about their rights and civil liberties. I believe that the private sector is playing the game. In Mauritius, for instance, the state and the private sector reached an agreement about 2-3 years ago that mandates profitable companies to re-invest 2% of turnover (in addition to what they may be doing already) in socially-responsible investments. To me, this is a good example how SRI is being translated into concrete actions to making a difference in people’s lives, especially the socio-economically vulnerable groups.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for companies in Mauritius and neighboring countries to manage?
Prakash Deenapanray: As explained earlier, all three themes are probably challenging for companies operating in the lesser developed islands. My immediate experience in Mauritius shows that most companies have more difficulty to grapple with the governance dimension of sustainability. Their environmental impacts are fairly easily quantified, monitored and evaluated, and the Environmental Protection Act provides the minimum standards for environmental protection. Also, all major investments and developments have to carry out Environmental Impact Assessments. Similarly, profitable companies are increasingly showing that they are more socially responsive. Nevertheless, the environmental and social responsiveness are mostly short-term in nature. This is what leads me to conclude that it is the governance for sustainability that is the most difficult for companies to grapple with. Governance related to the day-to-day running of business operations is well-established, but governance in terms of long-term orientations for achieving sustainability … there is yet some way ahead! The signs in Mauritius are promising though.
Emerging Markets ESG: What are the three most important sustainability issues in Mauritius that neither companies nor investors can ignore?
Prakash Deenapanray: I would say that there has been a gradual shift in how companies and consequently investors have caught on the concept of sustainability. The shift has in part been enhanced by government’s commitment to the Maurice Ile Durable (MID) vision – i.e. a high-level political orientation of transforming Mauritius into a sustainable island, which the private sector has now fully embraced, at least in its conceptual form. With this shift in gear, the foremost sustainability issues would be: (1) environment; (2) equity; and (3) corporate governance (for corporate sustainability). Having broad environmental issues, such as pollution and climate change, on the agenda is not a surprise since, analogous to the global trends, sustainable development has been triggered by detrimental ecological impacts of human activities. Equity places people at the centre of development, and relates to the fair redistribution of national wealth. This is much welcome because income disparity (as measured by the Gini Coefficient) has gradually increased in Mauritius over the past one and a half decade. It is well-known that people living in highly unequitable societies discount the future at higher rates making the achievement of sustainability a bigger challenge. ‘Equity’ is also backed up by government policy (such as through the MID) to democratize the economy. Corporate governance has traditionally been the premise of the rules and procedures to account for transparent and accountable day-to-day operations of companies. However, there is an emerging trend for corporate governance to also include the long-term vision and orientations of the operations of businesses – i.e. how does a company’s activities impact on sustainability or the Triple Bottom Line. It is not uncommon today to see the Mauritius Institute of Directors (MIoD), the Mauritius Export Association (MEXA), and the Mauritius Chamber of Commerce and Industry (MCCI), among others, promoting corporate sustainability among their members. Although we are not yet there, one would wish to see ethical investment being an outcome of these changing trends in doing business (soon!).