Sustainable investment in South Africa: Sanlam Investments’ commitment to making a difference

By Pawan Singh, Sanlam Investments Portfolio Manager: Sanlam Sustainable Infrastructure Fund

As South Africa grapples with various challenges, including energy security, water scarcity, high unemployment and inequality, the importance of sustainable investing cannot be overstated. These issues not only pose risks to the companies in which we invest, but also offer opportunities for us to deploy capital to address them head-on and make a tangible impact in our communities, our people and our planet.

Sanlam Investments recognises that it cannot single-handedly solve all these problems, but it can leverage its capital and influence to make a sustainable, meaningful difference. By aligning investments with sustainable practices, we aim to make an impact on some of the most pressing issues of our time and contribute to positive change in South African society.

One of Sanlam Investments’ recent projects that showcases our commitment to sustainable investing is a new R46 million sustainable infrastructure deal. The Sanlam Investments Sustainable Infrastructure Fund is funding a portion of Mkomazi Alien Fuel (MAF), a joint venture between Alien Fuel Group and Sappi in Umkomaas, KZN. This funding will contribute towards Alien Fuel Group’s 50% share in MAF.

Sustainable investing goes beyond just financial support; it involves active collaboration with the companies being invested in to promote sustainable practices. These practices encompass waste reduction, enhanced recycling, and a greater reliance on renewable energy sources. Specific, science-based targets are essential for monitoring performance and ensuring accountability within management. These actions not only lead to environmental gains but also positively affect a company’s long-term financial performance.

Effective waste management initiatives can generate job opportunities, especially in disadvantaged communities. Regardless of the motivation behind it, refining waste management practices is universally beneficial. With persistent challenges in municipal waste management, South African businesses are increasingly compelled to address this issue independently.

Alien Fuel Group provides baseload renewable energy from biomass to Sappi, one of the largest dissolving pulp manufacturing plants in the Southern Hemisphere. The project transforms and redirects landfill waste left behind in dissolving pulp manufacturing processes, such as sawdust, knots and barks, into wood pellets that can replace fossil fuels in industrial burners for the production electricity, steam and heat. The joint venture with Sappi will set up an R80+ million waste to energy plant to generate electricity and steam from these wood pellets. Notably, Sappi, a key player in the venture, has committed to purchasing wood pellets as part of an initial five-year period contract, reinforcing the sustainability of this initiative.

The Sanlam Investments Sustainable Infrastructure Fund, launched in September 2021 with a commitment of R500 million from Sanlam, aims to raise a further R5 billion to invest in local projects that drive economic growth, market development, and job creation while delivering stable inflation-beating returns. The funding of Alien Fuel Group’s growth projects aligns perfectly with the fund’s objectives.

The project is estimated to create 63 full-time jobs from the local community (25 employees have already been onboarded) and one-third of these jobs is anticipated to be female employees. In addition, during the construction phase of the project 72 temporary jobs were created of which 53 were from the local community. This innovative joint venture is poised to address several climate challenges. Close to 57 000 tonnes of annual landfill waste will be mitigated by replacing fossil fuel in generation of electricity and steam, and 322 000 tonnes of CO₂ emissions will be averted over a 10-year period, by diverting landfill organic waste. All CO₂ emissions mitigation and avoidance are estimates of what could be achieved and the project will work with an independent carbon consultant for the verification of emissions data. These estimates align directly with Sanlam Investments’ commitment to the UN Sustainable Development Goals specifically, SDG 5: Gender Equality, SDG 7: Affordable and Clean Energy, SDG 8: Decent Work and Economic Growth, SDG 10: Reduced Inequalities and SDG 13: Climate Action.

Sanlam Investments is not just investing; it’s investing with a purpose. As South Africa faces its challenges, we are stepping up to the plate, actively participating in sustainable practices and contributing to a brighter and more equitable future for all. Our investment in Alien Fuel Group is a testament to Sanlam Investments’ dedication to making a difference, one project at a time.