Speaker 0:
Joining Me Now at the Bait Winter Conference. Natasha Lind moles head of stewardship at Saracen and Partners Welcome Natasha. Thank you, Natasha. So you, as head of stewardship, what is the essence of stewardship and guiding companies on a more sustainable path?

Speaker 1:
So, stewardship, from our perspective at partners and the way we implement it, is, really, I would say, an investment philosophy. It's about being long term, and it's about being a responsible owner. And that's the way in which we steward our clients assets. And inevitably, when you're long term and you're responsible owner, you're concerned by issues like sustainability, like climate change like social cohesion and good governance. So

Speaker 1:
we take that all into account as part of our investment process. So our bottom up fundamentals analysis, but also really critically. And that's where I focus my time on how we engage with companies to drive positive change.

Speaker 0:
Absolutely So you mentioned climate change, and this just transition is quite a term quite unique to South Africa. So how does this inform the engagement that you have with company boards?

Speaker 1:
So if I zoom out just for a moment because climate change, as you say, it's a really, really big issue and the way we approach it is to think of it from a macro perspective. As I mentioned, we're long term investors, so climate change has a really profound impact on the long term growth rates that we're going to see on long term human welfare. So as a result, it's

Speaker 1:
critically important that we are thinking about climate change when we invest, but also in how we engage with companies. If we are going to get on to 1.5 degree pathway or well below two degree pathway, which is, you know, the ambition or indeed commitment that's been set out under the Paris climate Agreement,

Speaker 1:
then we need to get actors on the ground businesses and other entities to make sure they're deploying capital towards that objective. But we also need to think very carefully about this complex issue that you've mentioned, which is a just transition. We need to think about how we bring everybody along

Speaker 1:
because as soon as you divide the world into winners and losers, not only is it deeply unfair, but it's also much less likely that you can achieve that objective.

Speaker 0:
So, Natasha, perhaps you can explain to us exactly why divestment doesn't achieve the most optimal outcome.

Speaker 1:
Yeah, well, divestment has become very, very popular over the years, and it's a way of saying

Speaker 1:
we want to have nothing to do with this bad behaviour. So in the context of climate change, you've had students and many others calling for investors to divest to sell their shares in fossil fuel intensive businesses, coal producers, oil and gas producers.

Speaker 1:
There can be a role for that, and in particular for for an asset manager whose responsibility is to protect capital. If you think the business is going to become insolvent because of decarbonisation, then clearly it makes sense to sell to divest your shares. But if your objective is to make long term sustainable returns and to promote the transition, then divestment means that you lose your voice as a shareholder,

Speaker 1:
and what we are looking to do is to be an actively engaged shareholder, to use our voice on behalf of our clients, to push for change, to use our votes at annual general meetings, to vote for directors that are taking action and vote against directors that are failing to take action. So there is a role probably for both, But certainly I think it would be

Speaker 1:
quite simplistic to think that just through divestment we're going to achieve the transition we need to achieve.

Speaker 0:
Absolutely. So you've mentioned all these approaches to engagement. Perhaps you can comment on the importance of policy engagement.

Speaker 1:
Yeah, so again, with the case of climate change but also many other issues, these sustainability challenges are system wide, the systemic. So through engagements with individual companies, we can drive change. But

Speaker 1:
it's almost like whack a mole. You know, you sort out a problem here and it reappears over there. And because of the urgency of the challenge that we have with climate change, we need the whole system to transform and quickly. And for that we do need to engage at a policy level. We need to engage with governments. We need to engage with regulators. We need to engage with what I refer to as market influencers to the audit industry. We need to engage with the legal profession.

Speaker 1:
We need all of those to be saying we're committed to net zero and we're actually going to fulfil our roles, whatever it happens to be in a way that promotes that outcome equally, it's very difficult for businesses individually to pursue strategies. If you like that, are aligned with Net zero. If the government policy environment is working against that,

Speaker 1:
if they if in pursuing that strategy they end up making losses because the government's fiscal incentives are all wrong, then they're not going to be able to deliver that. So it's really important both in terms of system wide change but also getting the companies align to have that policy engagement.

Speaker 0:
So in our listed environment here in South Africa, E s G disclosure is a voluntary. Um, it's a it's a it's a voluntary disclosure. So if we don't have complete transparency with the E S G metrics that companies have to disclose on, how do we affect change through engagements?

Speaker 1:
Well, an engagement topic and priority can be disclosure, and often it is. This is not unique to South Africa. I think probably the single biggest complaint that we come across is the lack of information and the lack of consistency of information when it comes to environmental, social and governance issues. So so engagement therefore often prioritises that as a first step

Speaker 1:
But one thing I would actually is worth underlining is that even when you don't have detailed disclosure, it shouldn't stop you engaging on the ultimate outcome. You know, because we know enough

Speaker 1:
right? We know enough to know that, for example, manufacturers of internal combustion engines are a problem, and they need to transition to electric vehicles. We don't need all the detailed disclosures of, you know, their emissions et cetera, to know that they need to do that transition so we can engage on those outcomes those big strategic shifts alongside asking for improved

Speaker 0:
disclosures. Absolutely so in the developed world, such as the UK, the US and Japan and the like.

Speaker 0:
Net Zero seems to be the key focus area, whereas in South Africa we're balancing a whole lot of other developmental challenges. How then, would say, for example, with the EU carbon borders tax, carbon borders adjustment, tax apologies? How would that affect the automotive industry within South Africa, and particularly with so many people that are employed in the sector?

Speaker 1:
If I may start first with the point around balancing climate change or the developmental objectives, I think it's really important to take a step back. And I would say that's almost a false choice. Because ultimately human welfare rests on a sustainable planet, and particularly the most vulnerable communities tend to be located in emerging markets where they are less well, resource to be able to cope and mitigate the implications of climate change. So

Speaker 1:
it's not either, or if you like. In fact, we need a stable planet to have sustainable development and growth and welfare improvements. That was the first point I would make. But then, of course, there's going to be transitional issues and particularly hurting the more carbon intensive industries because those are the industries that will have to decarbonise and they'll have to decarbonise very quickly.

Speaker 1:
And for that I would say again, what you need is to think about a fair way to compensate those communities and incentivize them to be part of the transition that will require quite progressive government policy. But I think companies can also be part of that solution. So individual engagements that we might undertake, for example, with an oil and gas major or with a carbon intensive business would

Speaker 1:
also be asking for how are you going to make sure that this does not harm your staff or your suppliers. You know? What are you thinking about? To make sure that they come along with with with this transition.

Speaker 0:
So, Natasha, now then, just to close up the session, what are some of the key panel discussions that you are perhaps looking forward to, or some of the key takeaways that you saw? Perhaps from the deputy president's welcome address.

Speaker 1:
I thought those sessions this morning were really inspirational, to be honest, and the level and sophistication of the discussions are amongst the best that I have seen. I think the way this community is addressing not just climate change but also the just transition,

Speaker 1:
as I say is, is it provides an example for others to follow. And I suppose the thing that has struck me most of all is how the pension fund community is stepping up. And there is a maybe more supportive regulatory environment here. You know, you've got 28 which I think is actually

Speaker 1:
very progressive, But but there's a kind of real understanding that climate change is not some theoretical notion that it is absolutely something that this community has to engage with. And so There's a unity of purpose that I've not seen elsewhere.

Speaker 0:
I want to thank you for sharing your insights. We appreciate your time. Thank you.