I recently read something that I found deeply encouraging, which I think is worth sharing, and that was that the ozone layer was on track to recover fully within four decades.
That’s according to the UN-backed Scientific Assessment Panel to the Montreal Protocol on Ozone Depleting Substances quadrennial assessment report, which is published every four years. The latest report confirms the phasing out of nearly 99% of banned ozone-depleting substances.
“If current policies remain in place, the ozone layer is expected to recover to 1980 values (before the appearance of the ozone hole) by around 2066 over the Antarctic, by 2045 over the Arctic and by 2040 for the rest of the world. Variations in the size of the Antarctic ozone hole, particularly between 2019 and 2021, were driven largely by meteorological conditions. Nevertheless, the Antarctic ozone hole has been slowly improving in area and depth since the year 2000,” the report says.
The Montreal Protocol has thus succeeded in safeguarding the ozone layer, leading to notable recovery of the ozone layer in the upper stratosphere and in the process, has helped to decrease human exposure to harmful ultraviolet (UV) rays from the sun.
Apart from the good news about the ozone layer, what is especially pleasing for me is the important message conveyed – it shows how the collective spirit can achieve seemingly unattainable goals. In this context, we think of the coming global energy transition, and the associated goal of net zero carbon emissions. These seem like lofty targets now, but they may, with time and effort, become more tangible than the world currently appreciates.
The global energy transition matters. It matters because our planet can only sustain a population growing at its current rate if we are able to reduce the carbon intensity of that growth. Carbon dioxide emissions are closely linked with a warming planet and all the ramifications that go with it.
According to a new report by the Global Carbon Project, annual CO2 emissions reached 37.5 billion tonnes in 2022, a new record, and up 2% year-on-year. This in spite of a lingering pandemic in some parts of the world and moves by governments and corporates to curb emissions. To picture what this means, 37.5 billion tonnes works out at more than 100 million tonnes per day, and if one tonne of CO2 occupies a balloon with a 10m diameter, it’s enough to create a pile of balloons big enough to almost completely cover Manhattan Island.
Source: Google Carbon Project, 11 November 2022
It’s easy to see why. Coal is the culprit. In the face of elevated geopolitical strife, energy security has been prioritised over energy transition. Much of the developed world has gone back to using coal, natural gas and oil as energy sources and, just like Maslow’s hierarchy of needs, developing countries have put climate concerns second to their economic growth requirements. And the situation may have been much worse were it not for China’s brutal lockdowns in the year.
Source: Google Carbon Project, 11 November 2022
Source: Google Carbon Project, 11 November 2022
We have a clear need to transition from fossil fuels. However it is unpopular in the short term among policy makers and the public especially in a time of high energy prices, as we can see. It requires some financial or economic pain, sacrifice and reduced consumption in the short term.
We have a long way to go. Arguably global energy has been too cheap for too long, fueling surplus consumption in the West.
This is why the Montreal Protocol needs to be highlighted at this time, when it feels impossible. It is a reminder that it is possible if as humans we make meaningful changes to take care of our beautiful planet. But we need to come together as a global community and we need to take a longer term view.
This is where, in our industry, I really see the benefit of Environmental, Social and Governance (ESG) as a framework. That as a global community we start providing better information, encourage and make each other accountable, and that we make changes with our capital allocation and help each other through the discomfort of transition. If we could invest in two companies with similar profitability in a similar industry, but where one was working harder to improve their impact, then we should reward that behaviour with our capital. For more information, have a look at our Investec Global Sustainable Equity Fund.
To this end I am really proud that Investec was recently voted the top scoring SA bank in the Carbon Disclosure Project (CDP), scoring A- against an industry average of B-. Announced in Davos during the World Economic Forum, the CDP is a global organisation that runs the world’s environment disclosure system to assess impact and take urgent action to build a sustainable economy. The CDP scores approximately 15,000 companies on their contribution to climate change, forest and water security.
We can all start somewhere and with more information, and more intention, we can be a better global community and create much needed change.
For me, change starts within and I personally feel the best way to replenish the earth is to start with your own garden. As Zach Bush, a physician and visionary I admire says, one of the best things we can do is compost our waste and in that way replenish and restore the soil in our own backyard.
About the Authors
Kate holds a Business Science degree – her clients are Financial Advisers who use Investec's Investment Services. Keeping abreast of market conditions and being able to communicate relevant information is an important component of her role. Kate is also a qualified level 1 Kundalini Yoga teacher.
Ewan is a Wealth manager for high net worth individuals. He completed his accounting articles post-university and then moved on to a global mining company where he was a coal trader for three years. His interest has always been in financial markets and, specifically, investments which ultimately led him to Investec all those years ago.
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15 December 2022
Giant eggs, chess and the Netflix effect
There is immense power in storytelling both financially and mentally, and we need to be clear about the stories we tell and start changing the narrative about what success looks like.
My six-year-old son came up to me the other day and said “mom we need to go to Walmart or Target”. He informed me that, that is where you can buy Ryan’s World, Super Spy Giant Egg, Full of Secret Surprises! I informed my son that while Ryan's Giant Egg, Full of Secret Surprises does sound awesome, Walmart or Target were a little far away in America (and had a discussion about being discerning about marketing). This is a beautiful example of the Netflix effect - the Netflix effect is a surge in popularity as it relates to certain products, brands, and even celebrities because they feature in Netflix television shows and movies. Or in this example on Youtube.
Ryan’s World, for context, is a YouTube channel starring Ryan Kaji. He was only three years old when his parents started their YouTube channel in 2015. Initially, his parents recorded Ryan on their cellphones just to keep their parents updated on their family adventures. It has evolved into a charming family-orientated show which offers a variety of content, including science experiments, skits, family challenges and cartoon animations. Today, “Ryan’s World” has over 32 million subscribers, with 10 YouTube channels. Little boys like my son resonate with the authenticity of Ryan and the fun he has with his family and that has made for successful merchandise and online game revenue streams. The New York Times reported that the Kaji family earn at least $25 million from their "Ryan's World" merchandise sales, which totaled over $250 million in 2021.
Another excellent example of this is actually on Netflix. The Queen’s Gambit is the compelling story of Beth Harmon, a complex character – an orphaned woman with addictions, playing chess successfully in a male-dominated space. The Queen’s Gambit started streaming on Netflix on 23 October 2020. According to Netflix, the show was watched by 62 million members in its first four weeks. Moreover, The Queen’s Gambit made the Top 10 in 92 countries and ranked #1 in 63 countries.
As the show became more popular so too did Google searches for “Chess”. See the chart below from Google Trends:
Source: Google Trends, December 2020
This spike in interest also translated into a dramatic increase in physical and online sales. A toy company, Goliath Games, told news site NPR that its chessboard sales increased by 1,048% year-on-year. According to Bloomberg, chess.com added around three million new members in that November alone.
More interestingly for me though was how it created a behaviour shift. The New York Times reported that:
“Chess.com’s registrations of female players were up 15 percent compared to the composition of players who were joining the site before the series began. Evan Rabin, the founder of Premier Chess, said that enrollment in the fall virtual classes was up 50 percent and that many of the inquiries are coming from women. Maxim Dlugy, a grandmaster who runs Chess Max Academy in Manhattan, said that demand for private lessons has doubled and that he, too, is seeing more female players.”
This is storytelling at its most powerful. Stories connect and inspire and Netflix understands this. As Forbes reported recently that studies have found that people’s brain waves align when they hear a story. The reason why stories are so compelling is that our brain synchronises with the brain of the storyteller, according to Uri Hasson, professor of psychology and neuroscience at Princeton University.
It is something to be mindful of in our industry. For example, because gender equality is close to my heart, we need to be mindful of the power of the “and they lived happily ever after” narrative in the traditional prince and princess fairy stories. I’ve lost count of the number of times I’ve heard clients say their strategy for attracting more female clients is to look for divorced or widowed women. This is basically a narrative that women only have wealth if they received it from their prince husbands. Yes, those who are divorced or widowed are vulnerable and it is vitally important to assist them. However, just as Beth Harmon’s story encouraged more women to play chess, so as an industry, we need to start telling the stories of real women who have succeeded in their own right and inspire other women and men with those stories. I think the same applies to the everyday stories of minorities like Ryan or those who have been previously disadvantaged.
As Netflix illustrates, there is immense power in storytelling both financially and mentally, and we need to be clear about the stories we tell and start changing the narrative about what success looks like. And while I would like my son to be more discerning in the effect that marketers have on him, I am still going to try and find a Ryan’s World, Super Spy Giant Egg, Full of Secret Surprises online in time for Christmas (because it does sound awesome).
Wishing you and your family a joyful and healthy Christmas. May you create beautiful stories with your loved ones.
19 August 2022
Alternative aging and delayed gratification
Compounding can be one of the most powerful tools for building wealth. But it requires time to have a meaningful impact.
I read recently that the women in the latest series of “Sex in the City” are the same age as the women were in the first season of “The Golden Girls”. It blew me away. The difference in such a short period. The former are vital, joyful and thriving while the latter were all sitting in cardigans on their couch.
A recent financial services advert depicted a bunch of 70-year-olds, dancing, jumping into waterfalls with their friends, snorkeling in the sea, doing yoga and living their best lives to a kind of Peter Stuyvesant theme (apologies for the cultural reference to anyone born after the 1980s).
I am going to a 60th birthday party this weekend of a friend who does crossfit and yoga and is probably stronger and more filled with vitality than any 20-year-old I know and loves dancing at festivals.
Our attitude towards aging is shifting culturally and that requires shifting in our financial plans. If we are going to be healthier and fitter for longer, our finances need to be fit too.
This is an increasing challenge because instant gratification has become so entrenched in our culture.
In my childhood, going out for dinner was a rare and highly anticipated event. Now I can order anything I desire: Asian, Ethiopian or Italian via an app on my smartphone and it is at my door in 20 minutes. No sitting in the savouring of anticipation or looking forward to something. I can satisfy my impulse immediately at the push of a button.
Our attitude towards aging is shifting culturally and that requires shifting in our financial plans.
It’s not just food delivery that has adapted to facilitate impulse. Manchester-based digital label Ostereo recently undertook a study to document the length of every UK number one since 2008, plus UK number one singles in 1998 and Spotify’s top 100 most streamed songs. They found the length of pop songs is one minute and 13 seconds shorter on average than they were about 20 years ago. Howard Murphy, the founder of Ostereo, believes this phenomenon has its roots in shrinking attention spans and streaming platforms’ algorithms. “Our own data suggests consumers’ attention spans are getting shorter,” Ostereo reports. “More people skip before a song has ended and there’s a theory that streaming algorithms see this as a signal of dissatisfaction, which means the algorithm is less likely to recommend that song to other users, which means it is less likely to become popular”. Artists require people to listen to the song for a certain length of time to get airtime and paid which means adapting. “I think we’re definitely seeing changes in the length of songs and length of introductions, how quickly songs get to choruses. So as a result, we’re seeing shorter introductions,” Paul Trueman, general manager at AWAL, commented in the same article: https://www.prsformusic.com/m-magazine/features/song-length-the-spotify-effect/
In a world where food of any flavour arrives 20/30 minutes after I desire it and the chorus comes within a minute, it is a challenge to hold the course for retirement savings for a client whose expectations are increasingly short-term. There is no shortcut to compounding and we have to hold our clients through the discomfort of delayed gratification.
To give a simple example, let’s say we saved a R1 million from age 20 to age 40 and then didn’t add another cent but invested in a preservation fund. Assuming an 8% return, after nine years it would be R2 million, after 14.2 years it would be R3 million, after 18 years R4 million, 20.9 years R5 million, etc.
Compounding requires time to have a meaningful impact, which can be significant. The problem is the benefits don’t show in the first 10 to 15 years when people often get frustrated and withdraw their retirement savings (if they can when they change roles) looking to invest them in hotter returns or to buy a new car for example. This is damaging to your ability to retire, which is why I have reservations around the “two pot” proposed changes to retirement legislation this year that will allow up to a third of retirement savings to be withdrawn pre-retirement.
Critical in my view, is to educate clients about how, if they could delay retirement for a few extra years, they could unlock the major benefit of compounding that happens at the latter part of the investment journey, which could fund their longer, more vital older age, and help them live their best retirement life.
After all, even though I can order Ethiopian immediately via an app if I desire, having it in my diary, and looking forward to the experience of sitting in a circle of friends creates a lot more joy, than it arriving at my doorstep 20 minutes after I ordered it.
The music of investing requires a long build-up, long introductions, and time to get to the chorus. Compounding only unfolds with the fullness of time. To stay in the dance with the markets through the ups and downs over many years and reap the rewards of delayed gratification.
27 May 2022
The insect apocalypse and the loss of chocolate
The plight of insect populations is a reminder of the many things we can do to ensure a sustainable future – including the way we allocate capital.
I grew up on a farm and as a girl, I vividly remember the windscreen often being covered by dead insects on road trips to visit my grandparents. Now, when I drive across country I can arrive at my destination without one insect casualty. Not a midge, not a fly, not a bee, nothing. The insects sadly have not evolved to be more efficient flyers, nor is this just because KwaZulu Natal has more insects than the Cape. This is a global phenomenon.
A Danish scientist, Anders Møller has driven the same stretch of countryside in Europe, at the same speed every summer since 1997. He has been methodically recording the bugs that hit his windscreen. In that 25-year data gathering period, there has been a 97% decrease in the amount of bugs hitting his screen, according to The Guardian environment reporter Oliver Milman, author of The Insect Crisis: The Fall of the Tiny Empires that Run the World.
Milman shared a UN report in a podcast that came out in 2019, indicating that half a million insect species are expected to be extinct by mid-century.
Half a million insect species are expected to be extinct by mid-century.
Insects hold life aloft, Oliver notes. They replenish the soil, they pollinate our food, they are food for other animals, and they dispose of our waste. Even our chocolate is pollinated by a small midge! These small and seemingly insignificant creatures are vital to our joy.
In China there are people hand pollinating plants because of declines in the insect population. There are robot bees. Surely the solution is not this, but to protect and reverse the damage?
We are stripping our environment. In America and Europe, forests and wild fields have made way for monoculture crops. Some of these fields are treated 17 times a year with pesticides and chemicals (which we in turn ingest) creating mass biodiversity loss. While I don’t have data to back this up, I believe intuitively that the sprayed grape vines in Cape Town create the same effect.
What can we do as individuals? I feel South Africans are still largely unaware of this global environmental disintegration, but it is beginning to come more into our consciousness.
Eating less meat or more plant-based food for example, is one way to tackle the problem, livestock takes up great tracks of land. A recent report from our UK colleague indicated that roughly 30% of UK households are purchasing plant-based foods. It seems our UK brethren are more aware than we are. Supporting organically grown food is another small step. Regenerative farming, allowing rewilding, encouraging nature back, stopping pesticides and monocultures are all choices we can make that will make a difference. Insects require wild places and plant diversity to thrive.
Ideally, I would love our uber wealthy clients or the government to buy land and forests and just let them rewild, but that’s not terribly practical, nor is it good financial advice as the only return might be a return and expansion of the heart and soul (having said that, I gather there are some profitable rewilding farms in the UK).
Nonetheless, we can assist clients with making their capital more conscious while still earning a return.
“As an industry poised to control US$145.4 trillion in assets under management (AUM) globally by 2025 – according to the PwC ‘Asset & Wealth Management Revolution: Embracing Exponential Change’ report – fund managers are uniquely positioned to tackle climate change on multiple fronts.”
That’s the view of my colleague, Barry Shamley, who is the lead fund manager of our Investec Global Sustainable Equity Fund. Barry is deeply and passionately involved in driving the integration of ESG into the broader global Investec investment process and a holder of the CFA Certificate in ESG Investing and in Climate & Investing.
“The levers at our disposal to drive meaningful change include strategic asset allocations, investing in companies whose products or services make a difference in terms of climate mitigation or adaptation, as well as ensuring good corporate governance and other forms of investor activism.”
Barry expands on the topic further in this article on the role of the fund manager in tackling climate change: https://www.investec.com/en_za/focus/investing/the-fund-managers-role-in-tackling-the-climate-crisis.html
The Investec Global Sustainable Equity Fund seeks to create healthy equity returns through companies that are making a positive difference to the UN Sustainable Development Goals (SDGs) including climate change. See below for a comparison of the fund versus the MSCI World Index.
The MSCI World is almost 50% made up of companies that are negative contributors to the SDGs. However the Investec Global Sustainable Equity Fund screens out any company that is deemed to be creating negative impact and only includes profitable companies that are also making improvements to the SDG.
Figure 1: Investec Global Sustainable Equity Fund portfolio vs MSCI World benchmark
Source: ISS Datadesk, 19 April 2022
The Investec Global Sustainable Equity Fund is suitable for investors seeking long-term capital growth that is aligned with investing in our future. It is available in US dollars in the Investec Global Sustainable Equity Fund or in rands through the Investec BCI Global Sustainable Equity Fund.
Capital can create change and it is required. Back to the insects … if we destroy ourselves they will probably survive us in some form. Insects have survived five mass extinctions, but many of the beautiful, magical ones will be wiped out. As our crops become monoculture so does our environment. We might live in a world overrun by cockroaches with no variety of beautiful, magical insects and all the life they support. I, for one, would like to live in a world with butterflies, bees, birds and chocolate (thanks to the chocolate midge).
To find out more about the Investec Global Sustainable Equity Fund, click below: https://www.investec.com/en_za/investment/invest-offshore/global-sustainable-equity-fund.html.
17 February 2022
The rhythm of success
The lockdowns gave us a chance to relook at our working day, in ways that keep us refreshed and revitalised.
I took time recently to reflect on last year. One of the most interesting observations I made is how successful my women clients were last year, across the board. It really made me curious as to whether this success was in any way related to the flexibility gained through the global pandemic.
We are all conscious of the time efficiency and stress reduction gained through traffic avoidance and removing transfer time between meetings. This has been a positive for all.
The normalising of the work-life balance and the technology leaps that have assisted this might be a driver, given child care still falls heavily on the shoulders of women in this country. Being able to have an important meeting with Australia on route to dropping a child at school for example, or collecting a child from school at 3pm and being able to work efficiently at home rather than fighting traffic and fetching an exhausted child at 5.30pm, could well result in less stressed, more productive women.
Flexibility, I mused further, has allowed both women and men to operate according to their natural rhythms. We all understand the importance of being in tune with our circadian rhythms. The word comes from the Latin “dies” meaning day, and “circa” meaning around. Thus circadian means “around a day”, such as the sleep-wake cycle. If this cycle is not honoured, we are exhausted and unable to function properly. There are easy ways to optimise this cycle, like getting enough sleep, keeping a regular bedtime, exercise and quieting the mind.
There are also infradian rhythms, meaning beyond a day, such as the effect of the seasons on mammals, like hibernation and migration: “In summer we play and in winter we stay.” In summer, we are more social, create connections, spend time outdoors. In winter, we go inward and indoors and reflect.
Honouring these cycles keeps us refreshed and revitalised.
What is far less understood is that women have a special infradian rhythm that needs to be considered for life optimisation. In their book, “Wild Power”, Alexander Pope and Sjanie Hugo give insight into optimising the menstrual cycle of women. Women essentially have a seasonal cycle every month. In “summer”, or ovulation, women are energised and able to fill their schedule to the brim; this is a time to pack the diary full with meetings and socialise. Whereas in menstruation or “winter”, women feel a pull to “stay”, to rest, reflect, go inward. The authors expand that the insight gained during this time will aid them in the future. Obviously, as with the circadian rhythm this has nuances for each individual.
I hypothesised that perhaps some of the success I had witnessed over the past year was due to the fact that flexibility had enabled women (consciously or unconsciously) to optimise their infradian rhythm and their energy and therefore output.
Given that this work week was designed for the Henry Ford manufacturing era - for steady, factory output – we should ask if this is still optimal in the age of technology?
I also see the mood benefit among my male clients and colleagues. It’s worth taking time to consider our default acceptance of whether the eight-to-five cycle in the office work week is also the most beneficial to men? Given that this work week was designed for the Henry Ford manufacturing era - for steady, factory output – we should ask if this is still optimal in the age of technology? For strategic thinking? For collaboration and reflection?
Personally, as a lover of people, I am far happier in the office but far more strategic at home, where the space allows reflection and creative thought. A balance is helpful for my own optimisation.
As we move through the pandemic and find a new normal, I hope that we globally retain some of the benefits gained from the flexibility of being able to honor our own rhythms and that we retain the benefit of that vitality and the success that is possible as a result.
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