“No man is an island.” John Donne penned these words in 1624. In what could be interpreted as an act of direct contradiction to this principle, in that same year, Louis XIII built his palace in Versailles – a literal island to separate himself from his countrymen.

Four hundred years later, echoes of these diametrically opposed approaches to understanding one’s place and role in the grand scheme of things are clearly reverberating across the divided world in which we find ourselves – and the investment industry has not been immune from this influence.

Since the advent of Modern Portfolio Theory, investment managers have argued that their role is limited to the maximisation of returns for their clients at all costs. This myopic view of the role of investment has succeeded in generating significant wealth on the one hand, but at the same time, it has exacerbated a world characterised by persistent socioeconomic, geopolitical and environmental crises. The net effect of wealth creation at all costs for short-term gain has resulted in a world where long-term sustainability and resilience are at material risk. Operating as if our investment decisions are somehow isolated from the real impact on the world around us only perpetuates this negative cycle.

The severity and scale of these impacts have now reached a point that necessitates urgent action. Change is needed. Now. At scale.

TAKING A HOLISTIC APPROACH

Addressing the impacts of our investment decisions and achieving the associated objectives is no small feat. There is a lot of work to do – incorporating efforts in remediation, mitigation and adaptation. To be successful, this requires an approach to investment that is fundamentally different to our starting point.

It requires a principal reaffirmation of our investment responsibility – one that focuses on our role as protectors of our clients’ best interests, premised on an appreciation of the fact that, by and large, these extend beyond return and include a vast range of infinitely complex and interconnected issues that may have a positive or negative impact on the world. Acknowledging a broader responsible investment imperative enables a far more holistic view of our investment decisions which incorporates context, empowering us to identify, monitor and manage the real-world implications of our decisions. It opens the door to not only identify and capitalise on opportunity, but also proactively create it.

Further, the success of this reformative approach to investment requires collaboration at an unprecedented scale. It often requires us to leave our inherently competitive egos at the door and work together with our investee companies, our peers, our regulators, our communities and the broader society on achieving value-adding outcomes with respect to issues of systemic importance.

For Old Mutual Investment Group, this takes the form of increasingly considered, structured, collaborative stewardship efforts aimed at achieving real-world impact. We use the sustainable development goals (SDGs) as a framework for the nature of the problems we face and the objectives we need to achieve to correct an age of investing premised on island building. We are elevating our approach to engagement on the just transition to more sustainable and inclusive economies. Our engagements on these issues are predicated on an understanding of the bidirectional relationship that exists between our investment decisions and the world around us. Our objective always is to foster sustainability, stability and resilience.

As such, the future for stewardship for us is centred on the concept of regeneration. We are working with our stakeholders to pinpoint critical challenges that present notable risk to achieving our shared objectives, as well as potential opportunities that might exist for achieving progress on these goals. One of the current projects we have invested time into is researching constituent companies of the mid- & small cap group listed on the JSE. From this work, we will be able to identify the risks and opportunities for companies to adopt and implement a strategy towards a just transition away from fossil fuels. This research will address issues on water usage, energy usage, diversity pay gaps, and diversity and transformation. We look forward to how our stewardship practices can be the fundamental driver to seeing change in the abovementioned areas for the companies we will be focused on.

We are leveraging our experience in responsible investment to develop appropriate mechanisms for assessing and measuring progress on key themes, including identifying specific targets and metrics around material ESG issues, like energy production and sourcing, net job creation and retention and transformation. We are engaging our peers on opportunities for impactful partnerships and are continuously investing in our capacity to add value to every engagement in which we are involved. We are aware of our place as being only one part of the whole, inherently and indivisibly connected to every other part. We acknowledge our role as not only enablers but also leaders of regeneration, and are continuously ratcheting up our ambitions for impact. We take up this baton, committed to pursue this mission with unrelenting dedication.

All this because, when we look to tomorrow, it is clear to us that, as long-term investors and stewards of our clients’ interests and future, we are in the business of building bridges – not islands.