Once the flavour of the month in investment circles, ESG (environmental, social, and governance) is facing increasing criticism as merely facilitating corporate box-ticking or even greenwashing.
Sustainable investing has the potential to be more than just a check-box exercise if it focuses on projects and investments that consciously leave a positive impact on people, the planet and the bottom line.
It’s about putting your money where your mouth is and Fedgroup is taking a results-oriented approach with their secret weapon: investing in real, tangible assets that promote sustainability at their core.
This involves connecting investors directly with projects that not only generate positive social and environmental impact but also provide competitive financial returns. Fedgroup’s tangible asset investments include solar projects, bee hives and high-value crops.
Warren Winchester, GM: Ventures at Fedgroup explains Fedgroup’s unique model where tangible assets form the foundation for measurable impact while leveraging technology to maximise the positive outcomes of these investments.
Measurable impact
By focusing on tangible assets, Fedgroup differentiates itself from traditional investments such as equities. Winchester explains that the performance of many traditional investments are quite susceptible to sentiment and are subject to similar underlying market risk factors, while tangible assets can provide a more predictable risk profile over the term of the investment.
He said that tangible assets are often more predictable in terms of the risks that you face, but obviously, some climatic and environmental risks come into play. “That’s where technology can be very helpful to calculate forecasts more accurately.”
He adds that the focus on tangible assets means that there is a deeper understanding of the projects and their impact. Fedgroup can assess and assist in mitigating these risks, the impact of job creation, community development, and environmental improvements alongside financial returns.
“The sun’s going to shine and people need to eat, but we know there is still some risk attached to tangible assets because they’re real assets on the ground, but to a degree, it’s often more predictable than traditional investments that might be influenced by external market factors versus if you’re growing a good product with strong demand.”
Holistic view of success
Fedgroup’s tangible asset-based funds have outperformed traditional stock markets and Winchester said this is due to the predictability of returns which allow them to ‘end up at the same or better place,’ but with a much smoother ride in generating those returns.
The Group measures success by focusing on ‘people and planet, but never at the expense of profit.’ Each project is evaluated on its own to assess its contribution to these aspects. The metrics used include job creation, job hours, community upliftment, environmental impact, and resource management.
Water security is the next hot topic, not only in South Africa but on a global scale. Fedgroup is exploring the possibility of a dedicated water fund to ensure water security in the future. “This fund would focus on projects aimed at improving water quality, treating wastewater, and building dams, ensuring sustainable water access for communities.”
Technology is a crucial factor in achieving the positive outcomes of these investments. Precision agriculture techniques optimise projects, while innovations such as sap flow technology measure water usage within trees. This data-driven approach allows for informed decisions and improved resource management.
Addressing challenges and looking forward
Although Fedgroup’s approach offers significant benefits, there are challenges. Measuring impact can be complex. Fedgroup tackles this by combining technology, stakeholder engagement, and consistent reporting. Winchester adds that data limitations do exist, but by utilising in-house developed smart meters and engaging with stakeholders they strive to accurately assess the impact of each project.
Fedgroup measures the success of projects in several ways including how much money has gone back into the communities, and how they have helped uplift the communities around these projects. From an environmental perspective, Winchester highlights the importance of managing scarce resources such as water, saying it is vital to drive down the use of chemicals on these farms through different farming techniques to help improve the environmental impact around these projects, while still making sure that the financial returns are the same if not better than when chemicals are used.”
By prioritising tangible assets, measurable impact, and technology-driven optimisation, Fedgroup offers a realistic approach to investing sustainably. This approach demonstrates that financial returns and positive social and environmental changes can go together, enabling a more sustainable future.