Old Mutual’s pioneering investments in Green Energy and social infrastructure across Africa
By Iain Williamson, Old Mutual Group CEO
Old Mutual Group has leveraged its growing market share and well-diversified portfolio of financial services businesses to deliver exceptional value for shareholders in the first half of 2023, announcing a 28% increase in the interim dividend.
However, the dividend paid, and other positive financial performance metrics cannot deflect from the real-world impact that the company is creating on the ground through sustainable insurance and investment activities across Africa.
Old Mutual initially cut its teeth in the life insurance sector in South Africa but has since branched out to serve customers in asset management, banking, short-term insurance, and long-term savings in 14 country markets, many in Sub-Saharan Africa (SSA).
The company is already recognised as the largest non-bank investor in sustainable infrastructure across the African continent, thanks to multi-million-dollar commitments to green energy and various other environmentally and socially focused projects.
As 2024 draws near, Old Mutual plans to continue investing in projects with the potential to achieve significant positive environmental and social impact, encouraged by the fact that the 25-to-50-year infrastructure project runways are well-aligned with the statutory capital rules that global insurers must achieve.
Opportunities to combat the worst effects of climate change are of particular interest, with green financing projected to grow to around US$152 billion per annum by 2050, from the present USD20 billion.
Africa stands out as a key green energy investment destination due to the deficit of energy infrastructure on the continent, and the fact that solar is a viable option across much of the Sub-Saharan region.
There is a willingness from multiple stakeholders across the continent to support Africa’s contribution to achieving the global 2050 net zero targets to keep global warming to no more than 1.5°C – as provided for in the Paris Agreement, making the risk-return trade-offs of many Africa-based energy projects quite attractive.
The ongoing climate debate has however fostered a perception that the expectations of developed economies are somewhat unrealistic compared to developing nations.
The argument asserts that the push for an accelerated green energy transformation lacks sufficient consideration for the potential social costs that less developed regions might endure due to a hurried transition.
Some tough facts have crystallized over the years since the 2021 United Nations Climate Change Conference (COP26) in Glasgow, Scotland, and COP27 in Sharm El Sheikh, Egypt.
First, experts agree that the sub-Saharan region will be disproportionately affected by global warming.
Second, there is a growing appreciation that these economies require significant investments in social infrastructure regardless of the climate change narrative.
The 2050 climate change scenario could also contribute to significant migration across African countries, as populations move from rural to urban areas, and among skilled Africans seeking better opportunities in more developed markets.
Despite a collective eagerness among diverse stakeholders for an inclusive and prosperous continent, achieving this vision faces challenges due to current capacity constraints.
Therefore, investing in resources for capacity building, encompassing knowledge, skills, and technology necessary for the development and maintenance of appropriate infrastructure, is crucial for Africa-domiciled financial services companies.
Africa, despite its challenges, presents the opportunity for leapfrogging in certain areas, especially in harnessing solar energy, owing to its natural suitability for such resources.
A successful just energy transition will require cooperation from various stakeholders, including allocators of capital, government, and investors.
One of the key starting points for this cooperation is the existence of appropriate frameworks for public-private participation and joint-infrastructure projects.
In the case of green energy, careful alignment between existing distribution infrastructure and new generation capacity is non-negotiable, as evidenced by the challenges in building and commissioning solar and wind projects in South Africa’s Northern Cape province.
The social impact of new investments should be integrated into public-private participation frameworks to explore the trade-offs between job creation and jobs at risk, given the prospect of long-term total decarbonization.
Old Mutual has identified this as a critical component of national policymaking in the context of Africa’s just energy transition.
In support of our commitment to enabling a just transition to more sustainable and inclusive economies, we are developing several initiatives, including the launch of an integrated needs-based goals and financial wellness platform, complemented by cutting-edge digital adviser enablement, which will revolutionize brand-to-consumer interactions.
Old Mutual is also launching a transactional banking and credit card offering to the South African upper mass market and is exploring providing accessible financial services and solutions to a broader audience in collaboration and/or partnerships with the likes of UK-domiciled 10x Banking; One Connect, a division of Chinese insurer, Ping-An; and one of Africa’s leading mobile phone networks, Vodacom.
As a committed long-term investor, and a steward of our clients’ hard-earned wealth, Old Mutual aims to enhance its position as a leading investor in impactful projects, including initiatives like green energy capacity building.
This commitment extends from South Africa to the broader African continent.
Throughout this journey, Old Mutual aims to actively engage with numerous stakeholders, leveraging these partnerships to drive positive and sustainable change across Africa and beyond.
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