Investment in Africa that focuses on environmental, social and governance (ESG) factors can bring both financial returns for investors and improvements for local communities, a new report has said.
The study by the Abraaj Group, a leading investor focused on developing markets, has been presented at the World Economic Forum in Cape Town.
According to the research, Africa should rely on sustainable investment that can positively affect people and the environment, rather that counting on rising commodity prices to boost its economic growth.
Geetha Tharmaratnam, director of the Abraaj Group, said, “Our 20 years of investing on the ground in Africa has shown that helping local businesses grow is a ‘win-win’ situation for employees, communities and investors. This is because successful sustainable investment generates both social and financial returns”.
The report provides case studies over the solutions proposed by the group, such as share ownership programmes, long-term investment to ensure the greatest impact, investment strategies, medical plans and wage increases. The group also explored other key issues, such as the growth of businesses and investors in Africa, the challenges they have to face and the increasing contribution of women in business.
Davinder Sikand, the group’s head of sub-Saharan Africa said, “It is clear that investors are now looking to Africa in larger numbers. This trend is set to continue, so we need sustainable investment which will benefit local workforces and those who invest in them”.
In April, the Impact Economy Innovations Fund (IEIF) was created in an effort to boost impact investment in Africa. This followed Zambian vice-president Guy Scott’s calls for long-term sustainable investment in Africa, which in his opinion, could help the continent to manage its natural resources sustainably.