Segopotje Evonia Malatji
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Integrating ESG factors in investment decisions by mutual fund managers: a case of selected Johannesburg Stock Exchange-listed companies
Michael Bamidele Fakoya , Segopotje Evonia Malatji doi: http://dx.doi.org/10.21511/imfi.17(4).2020.23Investment Management and Financial Innovations Volume 17, 2020 Issue #4 pp. 258-270
Views: 974 Downloads: 411 TO CITE АНОТАЦІЯThis paper examines whether mutual fund managers incorporate environmental, social, and governance (ESG) factors when deciding which sector to invest on behalf of their trustees. In doing this, the top 20 South African mutual fund companies (asset managers) listed on the Johannesburg Stock Exchange (JSE) were selected. The paper identified the top 30 JSE listed companies (in the large industrial, equipment, and machinery sectors, excluding unlisted and service-oriented companies) where trustees’ funds were invested (with a total of 28 companies between 2007 and 2017) from the mutual fund companies’ Equity Fund Fact Sheets 2017 (representing recent investment focus). ESG data were collected from the integrated and sustainability reports at the sampled companies’ websites, and financial data were sourced from the IRESS database. This study adopted the panel data analysis. The results show an insignificant negative relationship between the ESG proxies (water usage, employee health and safety cost [number of work-related fatalities], percentage of women on corporate board) and return on equity (ROE). This means that the sampled companies disregard the United Nations Principle of Responsible Investment (UN PRI) guideline, suggesting that asset managers focus on increasing returns on shareholders’ investment without considering ESG issues. The paper concludes that the disregard for responsible investment guidelines does not encourage companies to improve their unsustainable business practices.
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