Sustainability, Impact Investments, ESG criteria, that’s the international trend in investing. However, people in the developed world define the criteria of ethical investment. Isn’t there a risk that new colonial rules will be imposed in Africa?

To anticipate it: I adhered to responsible investments even before the concept was born. I was brought up with the maxim that you just don’t do certain things and that it goes without saying that you don’t talk about them too much. I was taught to be fair and e.g., not to take advantage of someone in a weaker position, and to protect the earth because God has entrusted it to us. But: Criteria for responsible investments in Africa are tricky.

And then came across all these new concepts based on business ethics, such as impact investing, socially responsible investing, social entrepreneurship, investments based on ESG criteria. The acronym ESG is standing for ecological (E) and social (S) criteria as well as on good governance (G). The underlying idea of all these concepts were not new to me as they have just poured the obvious into rules.

Do ethics lower returns?

The main question this trend raised was in my view: If what is obviously taken for granted has to be put into explicit rules, then it is probably not a matter of course. Also, it seems that return was still at the heart of concerns. For years, the financial sector discussed the central question to responsible investment. Do ethics lower the yield of an investment? Is it harmful if financial promoters adhere to honesty, fairness and an ethical behaviour? Some may say that a financial system based on ethical rules would not need concepts for responsible investing.

Today, investments based on ethic criteria are a strong trend in the developed world. Responsible investments have become an industry with many different approaches, complex rule books and even with an own language.

Complex rule books

It is good news in my view that more and more investors are not only aware of the return that an investment hopefully generates. We welcome that more and more investors take into consideration the social or environmental consequences their investment will have.

However, I have difficulties to adhere to some of these rules. It is not clear who sets these rules, how they are amended and if they will really make the world a better place. Let me give you an example: I agree with the conviction that a world of peace is a desirable goal. But why should a company producing arms be banned from sustainable investments? Arms or the threat of using arms can in some political situations help keep peace.

We are all aware of the dangers of alcohol. But is this a sufficient reason to ban a wine trading company or a champagne grower from ESG funds? Can they really be held for responsible for the binge drinking by some consumers?

Investors should behave decently

Sustainable investment becomes even more complicated when it comes to Africa: Financiers from Europe and North America and development finance institutions link their commitments in Africa to the respect of sustainability criteria.

I strongly agree with the underlying idea. Financiers from Europe or North America should not support corrupt regimes. They should invest in businesses that exploit children or tolerate inhumane working conditions. They should not agree with production methods that destroy the natural resources of our planet.

The only matter is: These criteria have been developed in the North without involving the people in Africa. The authors of these rules did not ask if Africans would put the same priorities as the rich investors in the North. Europeans and Americans decided that women should get specific financial support. They said that some farming methods are financed and others not. Or, they agreed on financing first of all organic farming. But did they ask what priorities would Africans set?

Africans were not involved

Why do not responsible investors participate in these decisions the people that are the most concerned? Isn’t this attitude just another colonial behaviour like the Europeans showed it for so long in the past? Is it a sign of good governance not to involve the people who will bear the consequences of these decisions?

This is the main reason why I have doubts about responsible investments, impact investing and all the others concepts with which the so-called developed world wants to make Africa happy. I am not sure if we want really to make Africans happy or just the investors in the North. Therefore, criteria for responsible investments in Africa are tricky.

I agree that investments should be based on values. But I would feel better if we developed the criteria together with the people who are the most concerned by them. We should come to a consensus with the people affected on the way how we invest in Africa. We should define criteria that are to the benefit of all.

Otherwise, responsible investing risks just to be another way to dominate the African continent.

I understand that the thought of doubting responsible investing is not mainstream. Therefore, I would like to engage a broad discussion on this issue. Please feel free to share your views.