Five Questions about SRI – Weekly Expert Interview with Graham Sinclair, President,, South Africa – January 6, 2012

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 reflect on what SRI in emerging markets means to practitioners;
  • To collect a catalogue of examples of SRI in practice in emerging markets;
  • To raise awareness about SRI in emerging markets; and
  • To enable SRI practitioners in emerging markets to network with peers around the world.

This week’s interview is with Graham Sinclair, President, Africa Sustainable Investment Forum (

Africa Sustainable Investment Forum ( is an independent, not-for-profit pan-African advocate, knowledgebase and network launched in June 2010 to promote sustainable investment across the continent. The AfricaSIF Project is building as a network of institutions and individuals active in public, private and philanthropy sectors making investment in Africa happen across asset classes, countries and stakeholders.  Graham Sinclair is the President of AfricaSIF.  He is a sustainable investment strategist; environmental, social and governance (ESG) investment architect; and global project leader. In his professional capacity, he is Principal at SinCo, the sustainable investment consultants where he advises institutional investors on the integration of sustainability / environmental, social and governance (ESG) factors into investment policy and practice.  Since 2006 SinCo engagements in global emerging markets have modeled investment architecture integrating ESG factors into systems, strategy, and indexes for clients ranging from trillion-dollar investment managers to international organizations like the IFC, UN, and WBCSD, and include developing investor networks in emerging markets as Project Leader for the Principles for Responsible Investment (PRI).  Graham holds a MBA degree from Villanova University and a LL.B. from Howard College School of Law.

Emerging Markets ESG:  How would you define socially responsible investment (SRI)?

Graham Sinclair:  AfricaSIF is a pro-Africa and pro-sustainable investment, sharing ideas and activities to promote sustainable investment, a new, strategic step in facilitating investment in Africa that purposefully integrates ESG factors. The AfricaSIF vision is to ensure that the finance and investment sector practicing their profession in/into Africa advances sustainable development through integrating ESG factors into all investment decisions. benefits from the support and partnership from individuals and organizations. seeks mutually-beneficial, long-term relationships working with partners from diverse backgrounds and sourcing funds from individuals and institutions to ensure the legitimacy and authenticity of what we build. The Project Team is made up of individuals in the investment space who are connected to Africa. It is unlikely we will ever be in the same room at the same time with the active investment world we live in on different continents, but we share a common goal making AfricaSIF happen.

Emerging Markets ESG:  What distinguishes SRI from mainstream investment? 

Graham Sinclair:  AfricaSIF is open to members and mission across boundaries, political as well as conceptual. Our view is that all investment decisions in Africa should integrate ESG factors. In Africa, we need investment decisions that do not hurt our growing continent, that build stronger financial institutions, better societies and healthier economies. On any given day, we expect any member or stakeholder to behave, to act, to do business to a higher standard than any other players. We know many financial and investment institutions in the world today have less than stellar reputations. We hope attracts better investors.

Emerging Markets ESG:  Which extra-financial theme – environmental, social or governance – is the most challenging for African emerging market companies to manage?

Graham Sinclair:  The challenge is to grow in markets with some infrastructure, but much missing. The way of doing business is different, and with over 2,000 languages on the continent, getting a simple message across takes some skill. The key for companies is being clear about how the firm is making Africa better today – offering good value, creating jobs, not paying bribes, empowering locals – in order to build long term credibility. We hope investors nudge companies forward on this path, and are held to the same standards.

At a simple ESG issues level, the full range of ESG factors play out: climate change, food insecurity, governance and transparency, water scarcity, and more. Sustainable Investment (SI) is developing organically in the region. There is growing awareness that SI can play an essential part in tackling myriad social and economic challenges – and that the resulting economic growth will benefit African and global investors over the long term. SI is especially important for developing countries, which have limited resources to mitigate and/or adapt to climate change, rapid urbanization, agricultural production swings, or food price volatility. African sustainability includes issues that are common internationally, such as governance, climate change, water use, diversity, human rights, and worker health and safety. There are also topics of local concern, such as job creation, education, local ownership, community infrastructure development, the need for employee health care to supplement public health coverage for HIV/AIDS or water treatment systems.

Emerging Markets ESG:  Which extra-financial theme – environmental, social or governance – is the most challenging for investors in African emerging markets to analyze?

Graham Sinclair:  Data – good quality, timely and comparable – is often the biggest challenge, and it is a key resource that affects all assessment of ESG factors. Analysis in 2010 indicates approximately US$ 10 trillion, including US$ 450 billion in emerging markets, was invested integrating ESG factors. But how much of this sustainable investment is in Africa? Research by IFC-SinCo (Sustainable Investment in Sub-Saharan Africa: Investment practitioner views of sustainable investment in private equity and asset management in South Africa, Nigeria, and Kenya (IFC, July 2011) indicates over US$ 125 billion in some way includes ESG factors, with most of that located out of South Africa, the largest economy and institutional portfolio market.. Regional integration will encourage investment.

Emerging Markets ESG:      What particular SRI challenges and SRI opportunities currently exist in Africa?

Graham aims to attract new capital in new ways to Africa – investment that integrates environmental, social and governance factors. Looking across the various reports on Africa, including the IFC-SinCo Sub-Saharan Africa report and IFC-BSR North Africa report), there will be considerable growth of ESG factors in investment management in South Africa, Kenya, and Nigeria over the next five years – both in private equity and general asset management.

The primary drivers of sustainable investment identified by participants in the IFC-SinCo study were:

  • Good investment returns (a record of premium from ESG integration)
  • Explicit and tangible ESG benefits/impact
  • More information
  • Government/regulator incentives
  • Demands from clients/investor mandate/shareholder pressure.

The top five barriers cited by interviewees were:

  • Lack of adequate information to evaluate investment target ESG-related performance
  • Lack of evidence that ESG factors increase financial returns
  • High costs of implementing ESG investment
  • Lack of appropriately skilled advisors and necessary expertise
  • Short-term reporting against prospect of long-term returns. is designed as a platform. We are a network connecting and then making things happen. Many initiatives and actors contribute to sustainable investment in Africa, and AfricaSIF is an enabler for ALL of them.