Is Africa Ready to Prioritise ESG? Perspective From a Maverick Investor and Climate Activist

Born in October 1966 in Surrey, Sir Chris attended St Paul’s County Secondary School where he attained excellent grades. He enrolled for a Bachelor of Accounting & Business Economics at the University of Southampton, and later graduated with an MBA at the Harvard Business School with flying colours. After completing business school, he had some very fruitful stints with Apax Partners and Perry Capital, before going his own way to founding The Children's Investment Fund Management in June 2003.

Sir Chris Horn unashamedly wears the hat of “boardroom activist investor” and is widely known for voicing his concerns on pressing matters (ESG and charity) that are continuously swept under boardroom rugs. He backs his talk, puts his money where his mouth is and has pumped much of his personal fortunes to a good cause. He has donated £200 000 to the climate activist group, Extinction Rebellion. Most significantly,  he bankrolls the Children's Investment Fund Foundation (CIFF), which is the world’s largest philanthropic organisation aimed at helping children in low income countries.

Corporates are now mandated to take ESG responsibilities into account in an effort to put sustainability in the centre of corporate decision making (ESG stands for ‘environmental’, ‘social’ and ‘governance’ respectively). McKinsey & Company’s ESG framework article, dissects ESG into the 5 ways how it can create value to companies. A solid ESG framework within an organisation harnesses top line growth, reduces costs and waste, results in less legal and regulatory interventions, and enables investment and asset optimization.

Therefore, Sir Chris Horn’s novel investment philosophy ensures a two-fold pay off for investors and the wider society. A sustainable investment approach from the hedge fund tycoon has clearly highlighted that performance and ESG go hand in hand. TCI is reported to have racked up 12th straight year gains, even overcoming record losses at the onset of the pandemic. TCI’s ESG Investment Policy is underpinned by a set of fundamental ideologies which are namely: an ESG investment approach, continuous active ESG engagement with stakeholders, divestment in non-ESG compliant firms, ensuring that invested companies disclose emissions and should have set low carbon transition plans in accordance with the Paris Agreement.

In a bid to improve the lives of children living in poverty-stricken developing countries, Sir Chris Horn founded the CIFF: Children's Investment Fund Foundation in 2002. The organisation is headquartered in Addis Ababa (Ethiopia), and has satellite offices in Beijing, London, Nairobi, and New Delhi. Top priorities for the organisation include child health and development, adolescence health services, equal rights for girls and young women, and protecting the rights of children. The impact of the CIFF: Children's Investment Fund Foundation efforts have been tremendous, with unheralded success in the fight against Ebola in West Africa, the treatment of one million malnourished children in Nigeria, the saving of newborn children’s lives in Rajasthan (India), HIV prevention program for babies in Zimbabwe and the ongoing reduction of under-5 mortality in Uganda.

The benefits of ESG investing are clear on all fronts, with ESG investing inextricably  tied to sustainable development. The State of ESG in Africa paints a promising picture in some pockets within the continent. Central banks and governments on the continent have vowed to strengthen existing sectoral frameworks and promote a more dynamic approach to ESG implementation. Indeed, South Africa seems to be leading the charge and its  energy crisis might be a game changer for the continent, providing the political and economic systemic shock needed to finally incentivise a clean energy revolution.

The continent is blessed with hordes of flora and fauna, but the actions of its inhabitants continue to push some of its endogenous species to the brink of extinction. A lot still needs to be done on the continent, with Sub-Saharan Africa continuing to rely on extractive industries. The region is home to some of the world’s largest fossil fuel deposits in the form of oil and coal, yet for many states this has arguably been a resource curse.

The Say on Climate initiative, a brainchild of the CIFF, is an effective tool to coerce investors to align their portfolio companies with climate change. Will such a scheme yield fruits on a continent reliant on the fossil fuel business which contribute significantly to economic development and GDP (these firms are in turn, unsurprisingly, proving to be favourite stock picks on African bourses). Can the developing world, especially Africa, stay ahead of the ESG curve if both the government and private sector adopt Sir Chris Hohn’s stance?

There are promising developments, yet rhetoric needs to match reality to ensure the continent’s development is not further hampered by the impact of climate change and ignorant governance decisions. Environmental stewardship has to be the new norm, from the game watching drives through the Serengeti, the boat cruises along the Durban coast and the aeroplane fly-overs above the Victoria Falls. Hopefully the noise around laboratory grown diamonds, green walls, sustainable palm oil harvesting and green bond financing bring a new wave of green thinking.

By Tatenda Chikombero, a Money Maze Podcast Ambassador. Tatenda recently completed a Master of Management in Finance and Investment degree at the Wits Business School in Johannesburg, South Africa. He is an aspiring industrialist who is extremely passionate about making meaningful contributions to the African continent and the world at large. He highly gravitates towards the contemporary creative and entrepreneurial concepts related to thought-leadership, finance, strategy, and technology.

WATCH: SIR CHRIS EXPLAINS WHY HE SET UP SAY ON CLIMATE:

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