Edition: Sept - Nov 2013


Join the GEPF at a major international conference and help to shape the future

Oliphant . . . lead role

John Oliphant, principal executive officer of the Government Employees’ Pension Fund (GEPF), will take the opportunity to address crucial investment issues at PRI in Person 2013. The annual signatory investor event of the United Nations-supported Principles for Responsible Investment (PRI) will this year be held at the Cape Town International Convention Centre on
1-2 October.

The GEPF is SA’s single-largest investor. More than 90% of its portfolio is invested within SA, and 50% of this amount is in SA equities. Understandably, GEPF has a large shareholding in most JSE-listed SA companies. They include substantial investments in the mining sector, a primary driving force of our country’s economy.

It’s little over a year since events at the Lonmin group’s platinum mine at Marikana shocked the nation. At the time, GEPF cooperated with other responsible investors to engage with the mining companies. We had to ask some hard questions.

An important question was how we could use the crisis at Marikana as a catalyst to remind trustees and fund managers that environmental, social and governance (ESG) issues are not peripheral but mainstream. They must be seriously incorporated into our investment processes.

GEPF recognises that it needs to look at how ESG issues affect the long-term sustainability of the entities in which it invests, simply because this ultimately impacts on the sustainability of pension funds. Clearly, it includes providing for the livelihoods of our members and pensioners. GEPF is proud to be counted among the pioneers of such investment thinking.

In 2005, the UN secretary-general invited a multi-stakeholder group of experts from the investment industry, intergovernmental and governmental organisations, civil society and academia to be part of a process to develop the principles of a responsible-investment strategy. This group comprised many of the world’s influential institutional investors. What emerged were the Principles for Responsible Investment (PRI). GEPF was present when PRI was launched at the New York Stock Exchange in 2006 and is pleased to be amongst its founding signatories.

At present, GEPF represents Africa and the Middle East on PRI’s International Advisory Council. It also chairs the PRI South Africa Network which it was instrumental in launching five years ago. This network helped initiate and develop the Code for Responsible Investing in SA (CRISA), launched in 2011 by Minister of Finance Pravin Gordhan.

The initial 2005 gathering that led to the development of PRI and the 2012 events at Marikana highlight GEPF’s thinking around investment strategy. They are landmarks on the landscape across which we move in continual pursuit of the development and upliftment of the African continent and the quest for excellence in the endorsement, implementation and practice of responsible, developmental investment policies.

So engaging with investors to bring about change is not something entirely new to us. For example, during the 2012-13 financial year GEPF directly engaged a total of 15 companies on a variety of ESG issues. Of these companies, five are in the mining sector.

Mining in SA is not only rooted in our history – gold was extracted from these hills and traded up through the Persian Gulf and into the Arabian peninsula thousands of years ago – but will also determine our future.

The numbers are impressive. SA is the world’s largest producer of gold and chromium; the fourth largest producer of diamonds; the fifth largest producer of coal. The country holds some of the richest mining reserves on the globe, worth an estimated US$2,5 trillion, thus making it the world’s fifth largest mining sector in terms of value to gross domestic product.

And according to the Chamber of Mines, the SA mining sector creates over one million jobs both directly and indirectly. As significantly, it accounts for 20% of the country’s investment.

It is therefore crucial to ensure that this investment grows. Equally important is that it does so within an agreed responsible-investment framework such as proposed by PRI, CRISA and the Sustainable Returns for Pensions and Society project. Going forward, it must determine our investment policies.

Apart from our direct investment in mining equities, GEPF’s Priority Sectors Investment Fund will focus on projects that have a substantial impact on small to medium-sized enterprises, job creation and food security – as well as mining beneficiation – over a 20-year term. These will all be driven by GEPF’s responsible and developmental investment frameworks.

GEPF played a leading role in bringing PRI in Person 2013 to SA and is a platinum sponsor of the event. PRI in Person 2013 will be attended by a diverse group of leading and senior investment decision-makers from global pension funds, insurance companies, asset managers, foundations and service providers to institutional investors. PRI in Person 2013 provides an excellent forum to showcase investment opportunities in SA and on the African continent.

But more importantly, it is an opportunity for institutional investors to actively engage on material issues that impact on their long-term sustainability including the objective to achieve inclusive sustainable growth. Institutional investors, GEPF included, have an active role to play in achieving this objective.

They are invited to join with others of like mind to bring about this change. Together we can begin to set a new norm for sustainable investment practices.