Stewardship Report 2021/2022
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Stewardship Report 2021/2022
Contents
Introduction .......................................................................................................................................................................................................................................... 3
ESG Integration at Sygnia ........................................................................................................................................................................................................ 7
Collaboration and industry involvement ....................................................................................................................................................................10
The Year in Review ......................................................................................................................................................................................................................13
Proxy Voting Outcomes ..........................................................................................................................................................................................................14
Passive Investing ...........................................................................................................................................................................................................................22
Fixed Income ....................................................................................................................................................................................................................................28
Sygnia Infrastructure..................................................................................................................................................................................................................32
Multi-Manager Portfolios ........................................................................................................................................................................................................34
Private Investments.....................................................................................................................................................................................................................36
Conclusion and Outlook .........................................................................................................................................................................................................42
Page 2
Introduction
Who is Sygnia?
Sygnia is an innovative financial services group based in South Africa and listed on the main board of the
JSE and A2X markets. The company provides asset management, stockbroking and administration services
and a wide range of savings products to institutional and retail clients, supported by cutting-edge
technology platforms.
Sygnia is the largest international equity exchange traded fund (ETF) provider (and the second largest
overall) in South Africa. It offers investors the widest range of ETFs that track international equity markets
and manages over R32.2 billion in ETF investments. Sygnia has approximately R295.3 billion assets under
management and administration, with 64% staff- and management-owned (including a BEE staff scheme).
Transformation at Sygnia
As a proudly South African company, Sygnia remains committed to sustainable transformation in all its
spheres of operation. Transformation and gender equality strategies are a priority, with black and female
staff percentages increasing annually.
Gender equality is strongly promoted, with significant focus on the promotion of women to key
management positions. That commitment is reflected in the following statistics:
• The chairperson is a woman.
• 22% of the board of directors are women.
• 59% of staff are women.
• Many senior management positions are held by women, including Head: Special Projects; Head:
Employee Benefit Operations; Head: Institutional Administration; Head: Human Resources; Head: Retail
Business; Head: Marketing; Head: Risk Management; Head: Sygnia Itrix; and Head: Manager Research.
Sygnia is a level 2 BBBEE contributor
Sygnia takes a holistic approach to transformation, implementing strategies across the Group, and takes a
long-term view on compliance with the New FSC (Financial Sector Code). The ownership aspect was
partially addressed through the formation of the vendor-financed Ulundi Staff Trust for black staff and
management in 2013 and its successful value creation for eligible beneficiaries on its unwinding in the 2021
financial year.
Page 3
Sygnia has taken additional steps to address its B-BBEE standing, including:
• Changing the composition of its board of directors;
• Expanding B-BBEE staff training initiatives;
• Participating in the YES initiative.
Sygnia takes BEE ownership seriously
Magda Wierzycka
2001
• Set up Kagiso Asset Management as a joint venture between Kagiso Trust and Coronation Fund
Managers
2003–2006
• CEO of African Harvest Asset Management, largest 70% black-owned asset management company in
South Africa
• Created R300 million value for black shareholders when AH was sold to Cadiz Asset Management in
2006
Page 4
Sygnia
2012
• Set up vendor-financed Ulundi Trust – a broad-based BEE staff scheme that owns 20% of Sygnia
Asset Management
• Net-of-debt valuation as at 31 October 2015: R100 million
• Average allocation per participant: R3.5 million
2015
• Preferential allocation of Sygnia shares to BEE shareholders when Sygnia listed on the JSE on
14 October 2015 (stipulated in the formal pre-listing statement)
2016
• Enabled the acquisition of an additional 1% shareholding by a BEE investor
Corporate social responsibility: Education
Sygnia recognises that the future of South Africa rests in its youth, and we are determined to empower
them to become beneficiaries of a better future.
Sygnia’s key corporate social investment focus is on education, investing in initiatives from early childhood
development through to tertiary education programmes. Sygnia provides bursaries to scholars and supports
outreach education initiatives in under-resourced schools.
Sygnia’s corporate social investment objectives support:
• Programmes and organisations that facilitate improvement and access to training and learning in South
Africa;
• Projects that focus on the welfare and development of children;
• Projects that recognise and develop talent;
• Projects with clear and direct delivery objectives and in which administration costs are kept to a
minimum.
Sygnia is proud to partner with and support the following organisations:
Elkana Childcare
Elkana Childcare focuses on building a sustainable future through the development of social and
environmental awareness in the lives of children who live in severely adverse situations.
Page 5
The Homestead
The Homestead focuses on the healing, care and upliftment of street children. The organisation runs a
number of projects that focus on neglected, abused and vulnerable children who live and beg on the
streets. These projects aim to provide for physical needs (food, shelter, safety, clothing), psychosocial needs
(trauma counselling, behaviour modification, positive self-image and identity, etc.), developmental needs
(access to education, support to improve school performance, life-sustaining skills) and sporting and
recreational activities.
Andrew Murray House
Andrew Murray House is a registered child and youth care centre (children’s home). The home is
responsible for the care, support, protection and development of the children in its custody through various
therapeutic and developmental programmes.
Impact Trust
The Impact Trust runs programmes to identify the key value of resilience in learners. One of their
programmes is Routes to Resilience, which works with high school students and young work-seekers to
build leadership skills focused on sustainability and a sense of purpose – individually and in the community.
Mitchell’s Plain Bursary and Role Model Trust
The Mitchell’s Plain Bursary and Role Model Trust gives funding to students at one of 17 identified schools
in Mitchell’s Plain or to those who live in the area. The trust assists students with registration and/or tuition
fees for studies at higher education institutions and further-education and training colleges.
O Grace Land
O Grace Land provides a temporary safe haven for vulnerable young women who grew up in care homes
and institutions and are preparing to enter adult life. The organisation offers both life skills and transitional
support as the young women complete their education and prepare for the working world.
Ray Mhlaba Skills Training Centre
The Ray Mhlaba Skills Training Centre is a non-government funded organisation that is an extension
program of the Eastern Province Child and Youth Care Centre. Through development programs, the centre
focuses on equipping unemployed and underprivileged youth with knowledge and skills to obtain formal
employment or become entrepreneurs.
Regional Educare Council
Regional Educare Council specialises in early childhood development ("ECD") programmes. The
organisation's passion is the holistic improvement of the quality of education for children, and they motivate
and provide training programmes for ECD practitioners to encourage growth in the field.
Page 6VUSA Academy
The VUSA Academy creates social upliftment for children from underprivileged communities through
structured academic, sporting and recreational programmes. VUSA works predominantly with children from
five schools in the Langa community, none of which have the staff or resources to implement effective
sporting or extra-mural programmes for their learners.
LEAP Science and Maths Schools
For more than ten years, LEAP has developed unique, self-liberating high school education programmes for
marginalised children through the only network of independent, no-fee schools in South Africa. The
programme identifies student potential in high-need communities and offers free education for students
who study mathematics, physical science and English.
Won Life
Won Life is a registered non-profit organisation dedicated to improving the quality of education for the
learners in the community of Fisantekraal, just outside of Durbanville. This is achieved through four
education-based programmes: the Early Learning Centre (Grade R), Literacy Centre, High School Education
Centre and Teacher Mentorship Programme.
Christel House
Christel House transforms the lives of impoverished children through robust education and a strong
character development programme that is supported by regular healthcare, nutritious meals, guidance
counselling, career planning, family assistance and college and careers support.
Environmental, social and governance
integration at Sygnia
Environmental, social and governance (ESG) investing has evolved from what was known as socially
responsible investing (SRI) in the early 1960s, when portfolios excluded certain industries based on
involvement in particular business activities. SRI was initially a response to the Vietnam War, but other
events – such as the civil rights movement and the detection of the hole in the ozone layer – have
accelerated the growth of ESG.
Various guidelines and legislations have been developed to aid the evaluation of ESG investment factors.
Page 7Source: Dun & Bradstreet
Many approaches can be adopted to integrate ESG in the asset management industry. The table below
provides a brief guide to the typical ESG approaches used by the asset management industry globally.
Best-in-class Exclusions/Screening Thematic
Invests only in companies that Applies filters to lists of potential Targets a specific environmental or
lead their peer groups in ESG investments. social outcome; includes impact
performance; excludes investing. Invests in themes or
companies based on ESG assets specifically related to
criteria. sustainability.
Positive tilt Investing for impact Integration
Tilted towards sectors, Invests with the primary goal of Explicitly and systematically
companies or projects with achieving specific, positive includes ESG issues in investment
positive ESG characteristics; environmental/social benefits analysis and decisions.
excludes companies based on while delivering a financial return.
ESG criteria.
Page 8Because of the South African market’s size, it is a challenging one for pure ESG portfolios. Exclusion criteria
have the potential to create large active positions in an ESG portfolio. Sygnia has developed a sustainability
approach that offers products focused on having a positive impact while giving the investor market-related
returns.
The following industry frameworks and codes currently guide our approach:
• Compliance with the principles embodied in Regulation 28 of the Pension Funds Act ("Regulation 28")
in so far as it requires ESG considerations to be taken into account when devising investment
strategies for retirement funds;
• The principles embodied in the Code for Responsible lnvesting in South Africa ("CRISA"); and
• The principles embodied in the United Nations’ Principles of Responsible Investment.
Sygnia also reviews available research and industry best practices to ensure its approach remains relevant.
ESG integration at Sygnia can be broken down into multi-manager, passive and fixed income investments.
Products with ESG mandates may fall into any of these categories and are overarched by ongoing
shareholder activism. Sygnia also offers investment products with specific ESG mandates.
Multi-manager Passive/Equity Fixed income and infrastructure
• Documented ESG policy in • Proxy voting in • ESG issues increasingly form part
place collaboration with active of credit review as an assessment
managers in our multi- of non-financial risk
• Evidence to adherence of manager solutions
ESG policy • Engagement in the industry
• Low fees and accessibility around social, green and transition
• Proxy voting records to savings products for all bonds
• Engagement with
corporates
Products with ESG mandates
Shareholder activism
Page 9Collaboration and industry involvement
Code for Responsible Investing in South Africa
CRISA was launched on 19 July 2011 to encourage institutional investors and service providers to integrate
ESG issues into their investment decisions.
The five key principles of the code are:
1. An institutional investor should incorporate sustainability considerations, including ESG, into its
investment analysis and investment activities as part of the delivery of superior risk-adjusted returns to
the ultimate beneficiaries.
2. An institutional investor should demonstrate its acceptance of ownership responsibilities in its
investment arrangements and investment activities.
3. Where appropriate, institutional investors should consider a collaborative approach to promote
acceptance and implementation of the principles of CRISA and other codes and standards applicable to
institutional investors.
4. An institutional investor should recognise the circumstances and relationships that hold potential for
conflicts of interest and should proactively manage these when they occur.
5. To better enable stakeholders to make informed assessments, institutional investors should be
transparent about the content of their policies, how the policies are implemented and how CRISA is
applied.
Page 10Code for Responsible Investing in South Africa 2 (CRISA 2)
CRISA 2, developed from CRISA 1, embodies a revision of the five principles to encourage stewardship and
responsible investing. CRISA 2 will come into effect for reporting on 1 February 2023.
CRISA 2 can be applied by any organisation in the investment industry or by related parties involved in or
providing investment services.
The five principles
The principles are relevant but completely voluntary and can be flexibly and proportionately applied should
companies choose to align with them.
The five principles of CRISA 2 and how they should be implemented:
1. ESG integration: Integrating material ESG factors into investment arrangements and activities.
2. Stewardship: Enabling diligent and effective stewardship by demonstrating acceptance of ownership
rights and responsibilities.
3. Capacity building and collaboration: Contributing to capacity building and collaboration of other
applicable codes in addition to CRISA 2.
Page 114. Governance: Governance should be implemented in an accountable manner by having sound governance
practices in place.
5. Transparency: Transparency should be promoted through meaningful disclosure to the attainment of
positive outcomes.
Objectives
While the main objective of CRISA 2 is to integrate stewardship and responsible investing into South
Africa’s governance framework, the code also aims to be relevant throughout the investment industry,
regardless of differentiating factors between organisations. CRISA 2 aims to foster integrated thinking
through the expansion of the six capitals (financial, manufactured, human, intellectual, social, and
relationship and natural capital) and the acknowledgement of the triple context (economy, society and
environment). In parallel with the innovation of sustainable investment products, this should incorporate the
United Nation’s Sustainable Development Goals and South Africa’s National Development Plans to achieve
a more equitable and inclusive economy and address specific South African issues.
Outcomes and application
By moving to an outcome-based approach, the code intends for companies to have a positive impact and
be more inclusive, innovative and resilient. Principle implementation to achieve these outcomes will not be
measured using metrics or targets. Companies can apply the principles proportionately as best suits them,
motivating the concept of “apply and explain”, whereby companies explain their interpretation of the
principles and their executed by the organisation.
Variances from CRISA 1 (2011)
At its core, CRISA 2 maintains the fundamentals of the first code. CRISA 2 was developed to embrace and
align with local and global enhancements that promote having policies in place that incorporate positive
ESG changes and encourages real action to implement these policies. By moving to an outcomes-based
approach under which the principles can be proportionately applied through the “apply and explain”
methodology, the code aims to be universally applicable regardless of investment strategy, asset class,
organisation size or any other factors. Additionally, more focus is placed on how to implement each
principle, while emphasising the significance of strong governance.
As part of its active citizenship, Sygnia participated in and submitted comments and feedback on the final
revised Code for public comment in November 2020. Sygnia uses the CRISA principals to guide our
responsible investing and will continue to do so with CRISA 2.
Page 12Association for Savings and Investments South Africa
(ASISA)
ASISA represents the collective interests of the country’s asset managers, collective
investment scheme management companies, linked investment service providers, multi-managers and life
insurance companies.
Sygnia has a representative member on the ASISA Responsible Investment Standing Committee, which
focuses on ESG-related issues. Its aim is to implement a strategy that enhances the uptake of responsible
investments in the South African market. The Committee works closely with the UN Principles for
Responsible Investment to integrate ESG factors into investment processes.
The year in review
The 26th United Nations Climate Change conference (COP26) was held in Glasgow, Scotland in the last
quarter of 2021, bringing together over 100 world leaders for two weeks to discuss a clear plan of action to
contain and mitigate climate change. The goal of the conference was for world leaders to recommit to
limiting the increase of the global average temperature to below 2° C and secure global net-zero emissions
by 2050.
Two key outcomes were the signing of the Glasgow Climate Pact and agreement on the Paris Rulebook.
The former sets out what must be done to tackle climate change, while the latter provides detailed
guidelines on how countries will achieve a zero-carbon future.
Following COP26, the first quarter of 2022 was particularly difficult, with the Russia-Ukraine war triggering
new ESG considerations, particularly in the energy and gas sector and the defence sector. Volatility and
global supply issues in the energy and gas sector led to speculation that some countries will renew their
own exploration and production of fossil fuels, but we view this as the perfect time to accelerate investment
into renewable energy.
Investments in defence companies also sparked some debate about their ESG compatibility. Like the
tobacco industry, defence sectors are often excluded from ESG screening, but the question arose as to
whether companies supplying Ukraine and NATO should be excluded for ostensibly contributing to
international peace and stability.
Sygnia is excited about the launch of National Treasury’s first national Green Finance Taxonomy, which is an
official classification or catalogue that defines a minimum set of assets, projects and sectors that may be
defined as "green", or environmentally friendly. It supports emerging national policy and voluntary private
sector initiatives to sustainable finance by reducing costs and uncertainty in classifying a core set of green
activities. National Treasury’s taxonomy is supported by the International Finance Corporation and will
ensure that South Africa aligns with global best practices.
Page 13South Africa’s taxonomy ensures that national priorities will be reflected while remaining aligned with
international trends. It takes account of the model adopted by the European Union, which identifies
activities that contribute to a set of six environmental objectives and includes requirements that activities
adhere to social safeguards and “do no significant harm” to any environmental objectives.
In particular, the Green Finance Taxonomy:
• provides clarity and certainty in selecting green investments in line with international best practices and
national priorities and standards;
• increases the credibility and transparency of green activities and helps unlock large-scale capital for
climate-friendly and green investment in South Africa;
• reduces financial risks through the enhanced management of environmental and social performance;
• reduces the costs associated with labelling and issuing green financial instruments;
• supports regulatory and supervisory oversight of the financial sector.
Sygnia looks forward to seeing what this taxonomy can bring to the industry.
Proxy-voting outcomes
Proxy voting has the power to influence corporate behaviour and has been identified as a tool that investors
can use to encourage better business practices. It currently forms part of Sygnia’s active ownership
approach.
Sygnia participates in shareholder votes by proxy and does not attend in-person meetings with investee
companies. After receiving and reviewing research, rationale and guidance from select active managers in
our stable, we submit proxy votes on the Sygnia domestic tracker funds.
Proxy voting outcomes
Sygnia voted on 753 resolutions in 2021/2022, with 61 dissenting votes.
Proxy votes by Sygnia domestic index-tracker funds
Resolutions voted for Resolutions voted against % against votes
2021 Q4 145 13 8.23%
2022 Q1 191 18 8.61%
2022 Q2 239 20 7.72%
2022 Q3* 117 10 7.87%
692 61
*2022 Q3 includes votes from 1 July 2022 to 31 August 2022.
Page 14As a multi-manager, Sygnia requests records of the proxy-voting actions taken on behalf of our investments
from all our underlying asset managers.
The table below summarises all votes submitted by our underlying active managers.
Proxy votes by active managers for 2021/2022
Resolutions Resolutions Resolutions Total per
Overall % against votes
voted for voted against abstained manager
Coronation 1 182 71 1 1 254 5.67%
Abax 1 009 58 1 1 068 5.43%
Ninety One 968 15 28 1 011 1.48%
All Weather 1 855 95 0 1 950 4.87%
Visio 938 137 0 1 075 12.74%
Fairtree 915 46 1 962 4.78%
Sygnia 692 61 0 753 8.10%
7 559 483 31 8 073 5.98%
Total
We have further categorised and tallied the dissenting vote totals as per the table below:
Dissenting votes by theme
Dissenting votes per category % dissenting votes per category
Capital structure 122 25.10%
Remuneration 128 26.67%
Board structure 136 28.33%
Strategy, audit & risk 59 12.29%
Environmental & social 3 0.63%
Other 38 7.92%
486 100.00%
Breakdown of the votes by theme
While not many dissenting votes shaped the environmental and social portion of the pie chart below, the
growing number of companies submitting resolutions associated with ESG developments (which are
favourably voted for) should be noted.
These resolutions are largely to increase disclosure and reporting on the climate and environmental impact
of a company and include the approval and/or implementation of strategic policies the company wishes to
enforce, to track progress they have made and set out targets they want to achieve.
Page 15Another common resolution reflected in the results was the re-election of directors. Many of the votes in
favour of individuals were justified by their certifications and their experience with ESG issues. This further
highlights the significance and rising corporate awareness of ESG factors, even filtering through to the
election of board directors. Board structure speaks to the governance pillar – the constitution of the board
will ensure the sustainability of the company and lead to improvements in the environmental and social
pillars.
Dissenting votes by theme
Remuneration
Board structure
26%
28%
Strategy, audit & risk
12%
Capital structure
25% Environmental &
social
Other
1%
8%
The board structure, remuneration and capital structure themes all link to the governance pillar,
emphasising that while the environmental and social pillars are important, the governance and structure of
the business drives the direction of the company.
In an ideal world, companies will always act with integrity and do not submit resolutions that bring the
aforementioned pillars into question. We do not live in an ideal world, however, so it is encouraging to see
that these three themes comprise the majority of the dissenting votes. This shows that shareholders are
using their votes to address issues, aligning the interests of all affected stakeholders.
Resolutions voted against under the remuneration theme mainly related to excessive remuneration,
unjustified premium proposals and inadequate disclosures of compensation.
Board structure-related resolutions that were voted against mainly related to independence. While most
candidates were seen as sufficiently experienced and qualified, concerns addressed conflicts of interest, a
lack of rotation and directors being on too many boards and having capacity constraints.
Page 16Resolutions for the capital-structure-themed dissenting votes included placing shares under the control of
the directors and giving directors general authority to allot and issue unissued shares.
Resolutions voted against in audit and risk addressed lack of rotation and concerns about independence,
while some resolutions were to discharge directors from liability. Justifications for voting against these
included the fact that directors should always be held accountable for their actions.
Case study 1: Naspers and Prosus
Governance
One of the most discussed resolutions voted on last year was the restructuring of Naspers and Prosus,
which was proposed in May, voted on in June and came into effect in August 2021. It granted Naspers
shareholders a tender offer of their existing ordinary shares for newly issued Prosus ordinary shares, which
caused a great deal of commotion and apprehension in the investor community. This led to asset managers
engaging with management about their concerns, predominantly about the devaluation of Naspers and how
to minimise the NAV discount in Naspers and Prosus over the long term.
Prior to deciding how we would proceed, we met and engaged extensively with our managers to discuss
their views and concerns about the restructuring.
Across the board, managers were concerned about the rationale of the overall transaction and worried that
a new share class would bring the governance further into question, as the rights of the minority
shareholders would weaken even more. The biggest concern was that the proposed exchange ratio did not
account for the Naspers discount with Prosus and did not appropriately compensate Naspers shareholders.
The fear that the NAV discount would widen and leave Naspers to become a stranded asset increased
considerably.
To address these concerns, a letter was collated and signed by the representatives of 36 local asset
managers with combined assets under management of over R3.6 trillion. These included 36One, Abax and
All Weather. Despite their dissenting views on the transaction, many managers noted that they would tender
their Naspers shares and convert them to Prosus shares should the resolution be passed. Other asset
managers who engaged directly with the management board included Allan Gray, Coronation, Investec and
Ninety One.
Following these manager meetings, Sygnia conducted a comprehensive analysis and made an informed
decision in the best interest of its funds. The discount on the buyout indicated a huge value unlock, and we
identified the potential benefit this could generate.
Taking this opportunity, we added value by adding alpha to our Life pooled funds, especially SLSWIX. Due to
regulatory restrictions, we were unfortunately unable to action this in our tracker funds (ITRIX and unit
trusts).
Page 17While this year’s Naspers and Prosus AGM offered some improvements, fundamental themes remained in
need of attention. Recurring key issues ranging from governance and audit committee issues to
remuneration policies were addressed but not resolved last year, and the reduced share price remained in
the spotlight.
Resolutions included the re-election of auditors, directors and audit committee members who had served
for an extended period and would not be following best governance practices should they continue in their
positions. This led to questions about their independence and the board’s rationale for recommending their
re-election. While many candidates possess a wealth of experience and qualifications, it was noted that
these were not unique skills and could be found in new candidates.
Remuneration outcomes last year evoked strong sentiment that existing policies did not align the interests
of management and shareholders. Management profited from the performance of a part of the business
they had no control over, while the market value of the holding company continued to fall.
The revised remuneration policy proposed this year reflected some positive adjustments, including the
removal of long-term incentives. In addition, short-term incentives now incorporate ESG and sustainability
targets. While this is encouraging, concerns remain about the substantial weighting these targets have in
the short-term incentive performance calculation, given that they are viewed to be quite subjective.
Moreover, a discount-linked short-term incentive was introduced to address the issue of the reduction in
NAV. Some asset managers feel this should have been explored and assessed when raised previously, but
its intention is to ensure that managers are only compensated on material improvement in the reduction of
NAV and ultimately to realign the interests of shareholders and management.
The charts below show the change in holdings across our managers for Naspers and Prosus from 31
December 2021 to 30 September 2022.
Naspers
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Coronation Laurium Ninety One Visio Abax All Weather Fairtree
Houseview
Equity Portfolio
2021/12/31 2022/03/31 2022/06/30 2022/09/30
Page 18Prosus
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Coronation Laurium Ninety One Visio Abax All Weather Fairtree
Houseview
Equity
Portfolio
2021/12/31 2022/03/31 2022/06/30 2022/09/30
Having the same theme of material issues over the past two years puts the company under constant
scrutiny and highlights the significance and necessity of good governance, and our external managers are
undoubtedly keeping a close eye on all submitted resolutions.
Case study 2: Standard Bank
Climate
Standard Bank, Africa’s largest bank by asset size, proposed several steps to achieve its group climate
policy commitments and targets at its annual general meeting (AGM) in May 2022. This came in the wake of
criticism from climate activists about the group’s involvement in an advisory role for the East African crude
oil pipeline and the group’s role in financing liquefied natural gas (LNG) development in Mozambique.
After approval of the group’s climate policy in 2021, shareholders voted overwhelmingly in favour of all three
resolutions relating to climate change in the 2022 AGM, meaning that the group must report on progress in
the calculation and disclosure of baseline-financed greenhouse gas emissions. Such emissions derive from
exposure to oil and gas, and the company aims to update its climate policy to include short-, medium- and
long-term targets for the group’s financed greenhouse gas emissions from oil and gas to align with the Paris
Agreement.
The chart below shows the changes in the weighting of Standard Bank across our managers for the period
31 December 2021 to 30 September 2022.
Page 19Standard Bank
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
Coronation Laurium Ninety One Visio Abax All Weather Fairtree
Houseview
Equity Portfolio
2021/12/31 2022/03/31 2022/06/30 2022/09/30
It is encouraging to see the group take active steps to report on its journey to net-zero carbon emissions by
2050. Over the past year the group also received approval for its annual report to society and its ESG report,
transformation report and the Task Force on Climate-Related Financial Disclosures climate-related
disclosure.
Case study 3: Sasol
Climate
Sasol is a global chemicals and energy company with operations in southern Africa, Asia, Europe and the
US. The company is a significant emitter of greenhouse and atmospheric gases, including of carbon dioxide,
methane, nitrogen oxide, volatile organic compounds and sulphur dioxide.
Sygnia and its external managers held conflicting views on whether Sasol would be able reach the targets
set out in its 2021 Climate Change Report. Concern was expressed about the report’s lack of detail around
the risks to achieve those targets and – based on methane leakage, which results in higher warming, and
the fact that new gas infrastructure could risk locking in emissions – whether replacing coal with natural gas
is a credible pathway to decarbonisation.
Manager proxy votes
Resolution: Approve climate change report
Manager Sygnia Ninety One Abax All Weather Fairtree
Vote Against For Against For For
* Votes are based on whether the share was held in the fund at the time of the AGM.
Page 20The change in Sasol holdings across our managers from 31 December 2021 to 30 September 2022 is
below:
Manager exposure to Sasol at each quarter end
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
Coronation Laurium Ninety One Visio Abax All Weather Fairtree
Houseview
Equity Portfolio
2021/12/31 2022/03/31 2022/06/30 2022/09/30
The 2022 Sasol Climate Change Report addressed concerns about the transition from coal to gas,
recognising the importance of phasing out gas to reach its net-zero goal. However, due to gas’ lower
carbon footprint relative to coal, gas will be critical to reducing greenhouse gas (GHG) emissions in the
short to medium term and will include the introduction of LNG in a way that avoids potential infrastructure
lock-in. In the long term, Sasol’s preferred option would be to pursue a fossil fuel-free journey.
The bulk of Sasol’s carbon footprint is associated with its coal-dependent South African operations,
specifically its Secunda plant, which is one of the largest single-point sources of GHG emissions in the
world. Turning down boilers at the Secunda plant and using gas would reduce coal demand by
approximately 25%, which would help Sasol meet their air quality objectives and decrease their GHG
emissions.
Page 21Lifecycle of CO2e footprint of coal vs gas
Source: Sasol Climate Change Report 2022
Passive investing
Sygnia Itrix S&P Global 1200 ESG ETF
Exclusions/Screening
The Sygnia Itrix S&P Global 1200 ESG ETF tracks the S&P Global 1200 ESG Index, a subset of the S&P
Global 1200 index designed to measure the performance of securities that meet sustainability criteria while
maintaining the same overall industry group weights as the S&P Global 1200 Index.
Some sustainability criteria exclude companies based on business activities with a disqualifying UN Global
Compact score or based on specific business activities excluded from the eligible universe, as determined
by Sustainalytics. In addition to the exclusion criteria, each company gets a score for ESG issues, with the
top 75% of companies in each sector included.
Excluded business activities include:
• Tobacco: Companies directly or via an ownership stake of 25% or more invested in another company
that produces tobacco, or when tobacco or tobacco-related products and services account for more
than 10% of their revenue.
Page 22• Controversial weapons: Companies directly or via an ownership stake of 25% or more in another
company that is involved with cluster weapons, landmines, biological or chemical weapons, depleted
uranium weapons, white phosphorus weapons and nuclear weapons.
• Thermal coal: Companies that extract thermal coal or generate electricity from thermal coal or with a
level of involvement/exposure greater than 5%.
• Low UN Global Compact score: All companies at or below the bottom 5% of the UN Global Compact
score universe are ineligible.
This ETF provides exposure to the S&P Global 1200 with an ESG overlay. Its return profile is closely related
to the S&P Global 1200. The Sygnia Itrix S&P Global 1200 ESG ETF puts the world of sustainable investing
at your fingertips and offers extremely cost-effective access to a well-diversified portfolio of global stocks
while meeting sustainability criteria.
Based on the latest fund fact sheets, the table below provides an indicative comparison between the S&P
Global 1200 Index and the S&P Global 1200 ESG Index.
Indicator Global 1200 Global 1200 ESG Reduction in emissions
Carbon to value invested (metric tons
Co2e/$1 m invested) 79.42 68.65 -13.56%
Carbon to revenue (metric tons co2e/$1 m
revenues) 213.25 189.04 -11.35%
Weighted average carbon intensity (metric
tons co2e/$1 m revenues) 218.9 184.8 -15.58%
Fossil fuel reserve emissions (metric tons
co2e/$1 m invested) 1 170.08 877.61 -25.00%
*Comparison based on the latest index fund fact sheets for the S&P Global 1200 and S&P Global 1200 ESG and are not actual data
on the Sygnia Itrix S&P Global 1200 ESG ETF. Data are based on calculations by S&P. An explanation of these metrics is provided on
the S&P website: https://www.spglobal.com/spdji/en/documents/additional-material/spdji-esg-carbon-metrics.pdf.
Sygnia Itrix Solactive Healthcare 150 Index ETF and Sygnia Health
Innovation Global Equity Fund unit trust
Thematic and exclusions/screening
Industrial technology and processes have converged, benefitting the biotech industry, which includes
healthcare. An ageing population and the recent Covid-19 pandemic have accelerated healthcare
innovation, with BioNTech recently developing a successful SARS-CoV-2 vaccine quickly and safely,
leveraging decades of scientific experience. This area of healthcare is expected to grow exponentially, with
developments in genomic sequencing set to solve more healthcare conditions.
Page 23The Sygnia Health Innovation Fund offers access to global companies optimally positioned to benefit from
new health-related technologies and innovations, including pharmaceuticals, genomics, biotechnology,
nanotechnology, information technology, nutrition, well-being and fitness, genetic engineering, medical
robotics and medical 3D-printing technologies.
Fund construction includes the 150 largest healthcare companies in the developed world and satellite
investments in companies driving innovation in healthcare (e.g. biotechnology, genomics, digital health).
Companies are also screened based on ESG criteria.
We scored our Health Innovation Fund using the Thomson Reuters ESG methodology for an overall score of
73.09 out of 100.
Overall ESG
Name Weight ESG score
score
Oxford Sciences Innovation plc 1.94%
SBSA ITF Sygnia Health Innovation Genomics and
5.75% 50.17 2.88
Biotech Sub-Fund Seg
SBSA ITF Sygnia Health Innovation Global Equity Fund
73.57% 76.46 56.25
Seg
Prescient Global – Sygnia Health Innovation Global
18.01% 74.34 13.39
Equity Fund Class B
Sygnia Itrix Solactive Healthcare 150 ETF 0.73% 76.20 0.56
73.09
Companies in the portfolio include:
• Pfizer: Development/production of a wide range of medicines and vaccines in medical fields including
immunology, oncology, cardiology, endocrinology and neurology.
• Illumina: Global leader in DNA sequencing and array-based technologies for genetic and genomic
analysis, enabling the adoption of genomic solutions in research and clinical settings.
• Biomarin: World leader in developing and commercialising gene therapies for rare diseases. Biomarin
has a diverse pipeline that builds on its genetic and genomic expertise, manufacturing capabilities and
long-term partnering models.
Page 24Sygnia 4th Industrial Revolution Global Equity Fund (UCITS)
Exclusions/Screening
Sygnia prides itself on being an innovative fintech market disruptor that offers investors access to ground-
breaking, company-leading tech innovation, to which end the Sygnia 4th Industrial Revolution Global Equity
UCITS Fund was launched in November 2021. The Fund’s stock selection is based on the S&P Kensho New
Economy Indices, which provide exposure to companies that bring 4th Industrial Revolution themes to life.
Stocks within the universe are weighted by several criteria to determine their weighting in the Fund,
including fundamental valuation, price and earnings momentum, liquidity, market cap and sub-industry
weight. Finally, an adjustment to the allocation of the single stocks is made by applying an ESG screening
criteria.
ESG screening and methodology
A unique list of the underlying companies in each of the 25 Kensho New Economy subsector indices is
selected and rated out of 100 using ESG data provided by Refinitiv (Thomson Reuters). The selected
companies are then split into four quartiles based on their ESG scoring. The companies with the higher ESG
scoring receive higher weights in the portfolios.
• ESG score: 0–25, including 70% of the pre-ESG weight in final model,
• ESG score: 26–50, including 80% of the pre-ESG weight in final model,
• ESG score: 51–75, including 90% of the pre-ESG weight in final model,
• ESG score: 76–100, including 100% of the pre-ESG weight in final model.
Sygnia Itrix Sustainable Economy ETF
Impact and positive tilt
The growing interest in climate change and technologies that contribute to shaping the future led us to
launch the new Sygnia Itrix Sustainable Economy ETF. We believe this ETF meets the need in the
marketplace for innovative products focused on rapid advancements in technology, the global shift to
remote working, the increased use of smart technologies and institutional and individual focus on climate
change.
The ETF provides access to companies in the S&P Kensho Sustainable Technologies Index (KSUSTN),
which has an ESG overlay that screens out companies that generate revenue from thermal-coal
production/extraction or from shale, Arctic or oil-sands oil and gas extraction. Companies in violation of the
ESG screens are dropped, and the weights of the remaining constituents are scaled up to 100%.
Page 25The S&P Kensho Sustainable Technologies Index is made up of the seven component indices listed below.
S&P Kensho Advanced Manufacturing Index Measures the performance of companies focused on
enabling manufacturers to improve production
processes through digitalisation, automation, predictive
maintenance and optimisation of plant energy
conservation.
S&P Kensho Sustainable Staples Index Measures the performance of companies enabling
connected agricultural producers to enhance output
while reducing waste and resource exhaustion using
state-of-the-art sustainable practices.
S&P Kensho Clean Power Index Measures the performance of companies focused on
advances in clean technology and energy.
S&P Kensho Intelligent Infrastructure Index Measures the performance of companies that reflect the
transition to intelligent, adaptive and connected
infrastructure.
S&P Kensho Smart Transportation Index Measures the performance of companies focused on
autonomous and electric vehicle technology, commercial
drones and advanced transportation systems.
S&P Kensho Future Communication Index Measures the performance of companies focused on
advances in how people meet, collaborate and
communicate.
S&P Kensho Final Frontiers Index Measures the performance of companies focused on
technologies at the forefront of deep-space and deep-
sea exploration and development.
The ETF is broken up into four segments, providing access to companies involved with smart transportation
and manufacturing, sustainable agriculture, clean power, space exploration, intelligent infrastructure and
technologies that enable remote working.
The segments – and examples of companies likely to be included in them – are described below:
Sustainable infrastructure
Plug Power
Plug Power is building the hydrogen economy and is the leading provider of comprehensive hydrogen fuel
cell turnkey solutions. Amid an ongoing paradigm shift in the power, energy and transportation industries,
the company’s innovative technology powers electric motors with hydrogen fuel cells to address climate
change and energy security while providing efficiency gains and meeting sustainability goals.
Page 26Sustainable agriculture
Nutrien
Nutrien is the world's largest provider of crop inputs and services, playing a critical role in helping growers
increase food production in a sustainable manner. They produce and distribute over 27 million tons
of potash, nitrogen and phosphate products for agricultural, industrial and feed customers worldwide.
Combined with their leading agricultural retail network, which services over 500 000 grower accounts, they
are well positioned to meet the needs of a growing world and create value for our stakeholders.
Sustainable manufacturing
Boeing
As a leading global aerospace company, Boeing develops, manufactures and services commercial airplanes,
defence products and space systems for customers in more than 150 countries. As a top US exporter, the
company leverages the talents of a global supplier base to advance economic opportunity, sustainability
and community impact. Boeing’s diverse team is committed to innovating for the future, leading with
sustainability and cultivating a culture based on the company’s core values of safety, quality and integrity.
Sustainable society
Metaverse
Bloomberg projects that the metaverse market may reach a US$783 bn valuation in 2024, enabling people
to meet, collaborate and communicate online in the metaverse or in extended reality.
Features of the metaverse include:
• Enterprise collaboration frameworks (Zoom).
• Digital communities: Microsoft and Meta (Facebook) are building virtual worlds.
• Real estate in the metaverse has sold for more than US$500 000.
• Brands are teaming up with social game developers, e.g. Fortnite (Tencent) and Warcraft (Activision
Blizzard).
• Infrastructure supplies are ramping up production (Nvidia, Unity and Roblox). VR headset sales are
projected to surpass 34 million units by 2024 (Oculus, VIVE, Varjo, Pico).
• Google is looking into Web 3.0, which will allow composable smart contracts – programmable
blockchains that will allow rapid increases in innovation and entrepreneurship through a decentralised
internet.
Page 27Fixed income
Sygnia’s fixed income portfolios consist of tracker funds, multi-manager products and in-house actively
managed funds. Proxy voting does not apply to debt instruments, but there is scope for engagement within
debt instruments via debt arrangers, industry collaboration and at investor roadshows. We hold underlying
managers in our multi-manager products to account per the standards outlined in the previous section,
while for active funds we incorporate ESG considerations into the evaluation of potential investments and
engage with issuers through the appropriate fixed income forums.
Sygnia Money Market Fund Unit Trust
Impact
Sygnia has been a vocal advocate for lower fees to allow easier access to investments. Our ongoing
shareholder activism has also allowed us to be forthright about social change, and our Sygnia Money
Market Fund management fees are donated to fight corruption in South Africa.
The fund is suitable for investors who would like to make a meaningful difference in the South African
landscape by supporting non-political organisations that fight corruption in the public and private sectors.
Organisations that Sygnia donates to include:
• Helen Suzman Foundation
The Foundation’s liberalism is grounded in Helen Suzman’s legacy and draws on the history of liberal
thought in South Africa. It promotes liberal constitutional democracy and the rule of law, believing the South
African Constitution to be a liberal document. The preamble to the Constitution calls for “a society based on
democratic values, social justice and fundamental human rights” that aims to “free the potential of each
person” and in which “every citizen is equally protected by law”. The Foundation promotes good
governance, transparency and accountability and advocates for policies that translate the aspirations of our
Constitution into lived reality for all South Africans.
• Organisation Undoing Tax Abuse (OUTA)
OUTA is a civil society organisation focused on combatting fraud, corruption, maladministration and fruitless
and wasteful expenditure across government at local, provincial and national level and on holding
perpetrators to account.
• Ahmed Kathrada Foundation
The Foundation was formed in 2008 to continue the legacy of anti-apartheid struggle stalwart Ahmed
Kathrada and his generation. The Foundation is an independent, non-partisan entity. Kathrada, a former
Robben Island prisoner, served 26 years in jail alongside his fellow Rivonia Trialists for their stance against
the apartheid government. Kathrada’s life was characterised by his commitment to the best values and
principles of the South African liberation struggle, particularly that of non-racialism.
Page 28• Corruption Watch
Corruption Watch is a non-profit organisation launched in January 2012 that relies on the public to report
corruption to it. The NPO uses such reports as an important source of information to fight corruption and
hold leaders accountable.
• The Black Sash Trust
Founded in 1955, the Black Sash works towards the advancement and realisation of human rights and
social justice in South Africa as outlined in the South African Constitution. The organisation emphasises
social security and access to justice for all who live in South Africa, but particularly for women, children and
the most vulnerable. In the quest for the realisation of socioeconomic rights, the Black Sash monitors
government service delivery, disseminates information and advocates for policy and process changes.
• Council for the Advancement of the South African Constitution (CASAC)
CASAC was formed in September 2010 out of rising concern about the shift in the political culture in South
Africa and in the leadership of the ANC, and it has established itself as a key role player in the civil society
environment. CASAC’s driving motivation is that the Constitution provides the principled bedrock for the
operation of public and private power in South Africa.
CASAC is a project of progressive people who want to advance the South African Constitution as the
platform for democratic politics, the advancement of human rights and the socioeconomic transformation of
society. It subscribes to the principles and values enunciated in section 1 of the Constitution and promotes
the notion of progressive constitutionalism to advance the rights of citizens and protect human dignity.
CASAC’s key focus areas can be summarised as:
• Building a culture of human rights.
• Strengthening institutions of governance and the rule of law.
• Promoting accountability and integrity in public life.
Debt capital markets: ESG bond issuance
The first social and sustainability-linked bonds were issued in the debt capital market in 2021. More than
R7.3 bn worth of ESG bonds were issued in the first half of 2022, with only R1.3 bn of that issuance via
private placement. ABSA, FirstRand Bank and Investec Bank all issued inaugural ESG bonds.
Page 29JSE-listed ESG bonds as at 30 June 2022
14000
12000
10000
8000
R(m)
6000
4000
2000
0
2014 2015 2016 2017 2018 2019 2020 2021 2022
Green bonds Sustainability- linked Bonds Social Bonds
Source: RMB, JSE
Examples of JSE-listed ESG bonds
Barloworld sustainability-linked bond
Sygnia participated in the private placement of a sustainability-linked bond issued by Barloworld in June
2022 that raised a total of R1.1 bn across two notes.
The bond includes key-performance indicators (KPIs), which, if met, would result in a step-down in the
coupon payable, thereby reducing interest costs to the issuer. The bond also includes a step-up clause if
the KPIs are not met.
The KPIs are:
• Decreasing the lost-time injury frequency rate by 6%, resulting in a coupon adjustment of 2 basis points
per applicable period.
• Increasing solar-powered photovoltaic (PV) energy consumption by 20%, resulting in a coupon
adjustment of 3 basis points per applicable period.
Fortress sustainability-linked bond
Sygnia took up an allocation of a sustainability-linked bond in February 2022 issued by Fortress REIT Ltd, a
JSE-listed property fund.
The KPI focused on the installation of an additional 4.2 MWp solar capacity at properties owned by Fortress
from an existing, baseline capacity of 4.735 MWp. Should the KPI be met, the coupon would ratchet down
by 10 basis points per applicable period. However, if the KPI is not met, the coupon would ratchet up by 5
basis points per applicable period.
Page 30Barloworld gender-linked bond
The JSE has also seen an increase in the issuance of social bonds, including gender-linked bonds.
Barloworld came to market with an ESG-linked bond for which KPIs focus on gender diversity.
Unfortunately, Sygnia was at its maximum exposure (set by our credit committee) to this issuer at the time
of the auction and did not participate in this round.
The KPIs:
• Increasing the gender diversity in company leadership from a baseline of 44.9% across the Board and
Executive Committee to 50% by 2025.
• Growing the proportion of black, women-owned businesses in the company’s supply chain from a
baseline of 13.8% to 15% by 2025.
Although punitive step-up ratchets are applied to the coupon should targets not be met, these increases
are smaller than the corresponding step-down ratchets.
Sygnia Global Income Fund
In November 2021, Sygnia launched the Sygnia Global Income Fund, a dollar-denominated portfolio
domiciled in Ireland.
The Fund invests in a portfolio of investment-grade debt securities, cash deposits and money market
instruments, adopting a thematic approach whereby it invests primarily in debt securities specifically related
to environmentally sustainable activities (i.e. green bonds). As ESG is incorporated into the investment
process, the fund is currently classified as Article 6 per Sustainable Finance Disclosure Regulations criteria.
The voluntary International Capital Market Association (ICMA) Green Bond Principles 2018 are used as a
guide for the Fund’s thematic approach. Sygnia favours bonds that have been subject to independent green
bond verification and certification against a recognised external green standard or green bond scoring.
One of the ESG bonds held within the fund is described below.
Apple Bond (AAPL 2.85 02/23/23)
The bond is a fixed rate, semi-annual coupon bond that matures on 23 February 2023.
The use-of-proceeds bond allocates funds to the following eligible projects: renewable energy; energy
efficiency; pollution prevention and control; sustainable water and wastewater management; circular
economy adapted products, production technologies and processes; and green buildings.
EY audits the allocation of green bond proceeds to ensure compliance with the stated ESG requirements.
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