Sustainability, Impact Investments, ESG criteria, that’s the international trend in investing. However, ethical investment criteria are only decided in the developed countries. Isn’t there a risk that new colonial rules will be imposed in Africa?
To anticipate it: I adhered to responsible investments even before the concept was born. I was brought up with the maxim that you just don’t do certain things and that it goes without saying that you don’t talk about them too much. I was taught to be fair and e.g., not to take advantage of someone in a weaker position, and to protect the earth because God has entrusted it to us.
And then came across all these new concepts based on business ethics, such as impact investing, socially responsible investing, social entrepreneurship, investments based on ESG criteria, the acronym standing for ecological (E)and social (S) criteria as well as on good governance (G). The underlying idea of all these concepts were not new to me as they have just poured the obvious into rules.
The main question this trend raised was in my view: If what is obviously taken for granted has to be put into explicit rules, then it is probably not a matter of course. Also, it seems that return was still at the heart of concerns. For years, the financial sector discussed the question if it would lower the yield of an investment if its promoters would adhere to honesty, fairness and an ethical behaviour. Some may say that a financial system based on ethical rules would not need concepts for responsible investing.
Today, investments based on ethic criteria are a strong trend in the developed world, and they have become an industry with many different approaches, very complex rule books and even with an own language and referential system.
Complex rule books
It is good news in my view that more and more investors are not only aware of the return that an investment hopefully generates, but take into consideration the social or environmental consequences their investment will have.
However, I have difficulties to adhere to these rules as it is not clear who sets these rules, how they are amended and if they will really make the world a better place. Let me give you an example: I absolutely agree with the conviction that a world of peace is a desirable goal. But why should a company producing arms be banned from sustainable investments as arms or the threat of using arms can in some political situations help keep peace?
We are all aware of the dangers of alcohol. But is this a sufficient reason to ban a wine trading company or a champagne grower from ESG investment funds? Can they really be held for responsible for the binge drinking by some consumers?
Sustainable investment becomes even more complicated when it comes to Africa: More and more financiers from Europe and North America and more and more international financial development agencies link their commitments in Africa to the respect of sustainability criteria.
I strongly agree with the underlying idea. Financiers from Europe or North America should not support corrupt regimes, the exploitation of children, inhumane working conditions or production methods that destroy the natural resources of life on our planet.
The only matter is: These criteria have been developed in the North without involving the people in Africa and without asking if they would put the priorities as the rich investors in the North. We in Europe and North America decide that women should get specific financial support, that some farming methods are financed and others not or that only organic farming will be provided with funding.
Africans were not involved
Why do not responsible investors participate in these decisions the people that are the most concerned? Isn’t this attitude just another colonial behaviour like the Europeans showed it for so long in the past? Is it a sign of good governance not to involve the people who will bear the consequences of these decisions?
This is the main reason why I have doubts about responsible investments, impact investing and all the others concepts with which we want to make Africa happy. I am not sure if we want really to make Africans happy or just the investors in the North.
I agree that investments should be based on values, but I would feel better if we developed the criteria together with the people who are the most concerned by them. We should come to a consensus with the people affected on the way how we invest in Africa. We should define criteria that are to the benefit of all.
Otherwise, responsible investing risks just to be another way to dominate the African continent.
I understand that the thought of doubting responsible investing is not mainstream. Therefore, I would like to engage a broad discussion on this issue. Please feel free to share your views.