Harvesting the low-hanging fruit.

“We do not inherit the earth from our ancestors, we borrow it from our children.”  (Haida proverb)

Despite lofty sustainable development goals established by the UN in 2015 and supposedly to be achieved by 2030, much of the world continued to suffer from the The Boiling‘ Frog Syndrome‘ until early 2020. 

Faced not only with an unprecedented global health crisis, but also with widespread wildfires, flooding and droughts ranging from North America, large parts of Europe to China and Australia, many more people suddenly noticed that previously localised issues increasingly have a global dimension and cannot be dealt with on a local basis only.

That’s an important realisation, especially from a sub-Saharan African (SSA) perspective.  

Why?  

Whereas infectious diseases like Ebola or issues such as soil erosion and droughts were mostly observed on the evening news in developed countries, there is now an increasing commonality of issues between developed countries and frontier/emerging markets which increases the likelihood of these issues being addressed.  

Drought-resistant crops and soil-enhancing fertiliser production are examples of challenges to be tackled by farmers in sub-Saharan and Western European markets alike. Decarbonising energy production is another layer of commonality. Recent success stories, like the speed covid vaccines have been developed, as well as the emergence of RTS,S as the first Malaria vaccine, especially for African children, show the possibilities. 

Before considering practical investing implications for sub-Saharan African markets, it’s helpful to think about a suitable framework to evaluate markets, industries and ultimately opportunities.  

While there are various schools of thought, I personally believe the BlackRock distinction between sustainable solutions and ESG integration is among the most practical framework out there used by investors. While sustainable solutions, driven by investors, target behaviour, distinguishes between Avoid Strategies and Advance Strategies, ESG integration is geared towards achieving enhanced returns by incorporating ESG information, derived for instance from climate models. 

From an SSA perspective this framework, if applied without cutting corners (aka green-washing) will guide investment decisions in the following way: