Investment update | Why ESG matters

South African markets closed in the red yesterday, as investors assessed US jobs data for cues on the US Federal Reserve's (Fed) interest rate path.

Pharmaceutical companies, Life Healthcare Group, Netcare and Adcock Ingram Holdings dropped 6.7%, 3.8% and 1.2%, respectively.

Food companies, RCL Foods, Famous Brands and Tiger Brands shed 4.7%, 4.6% and 2.5%, respectively.

Gold miners, Sibanye Stillwater, Harmony Gold Mining and AngloGold Ashanti declined 3.1%, 2.7% and 1.8%, respectively. Platinum miners, Anglo American Platinum and Impala Platinum fell 3.1% and 1.7%, respectively.

On the flipside, telecommunications companies, Telkom SA SOC, MTN Group and Vodacom Group advanced 3.1%, 2.2% and 1.0%, respectively.

The JSE All Share index marginally declined to close at 76,046.88.

Yesterday, the South African rand strengthened against the US dollar. The yield on benchmark government bonds fell yesterday. The yield on the 2030 bond declined to 10.90%, while that for the longer-dated 2040 issue fell to 13.10%.

At 05:30, the US dollar is trading slightly lower against the South African rand at R18.5509, while the euro is trading 0.1% higher at R19.9091. At 05:30, the British pound has gained 0.2% against the South African rand to trade at R23.2818.

Market updateby AnchorCapital

US markets ended higher yesterday, following the US Fed's dovish monetary policy stance.

Semiconductor chips company, Qualcomm surged 9.7%, after the company forecasted better than expected sales and adjusted profit for 3Q24, driven by selling pricier chips into Android smartphones with AI features.

Media and entertainment companies, Warner Bros Discovery, Netflix and Walt Disney advanced 4.3%, 2.4% and 1.9%, respectively. On the contrary, e-commerce company, Etsy plunged 15.1%, after the company reported lower than expected gross merchandise sales and profit in 1Q24.

The S&P 500 index rose 0.9% to settle at 5,064.20, while the DJIA index advanced 0.9% to close at 38,225.66. The NASDAQ index climbed 1.5% to end the trading session at 15,840.96.

UK markets finished firmer yesterday, following upbeat corporate earnings reports. Banking firm, Standard Chartered surged 8.8%, after the company reported better than expected pre-tax profit in 1Q24.

Homebuilding companies, Taylor Wimpey and Persimmon advanced 2.4% and 1.3%, respectively. Retailer, Ocado Group gained 2.0%, after data showed that the company was Britain's fastest growing grocer over the last quarter, followed by discounter Lidl and upmarket food seller Marks & Spencer.

Energy company, Shell rose 1.9%, after the company reported upbeat profit of $7.70 bn in 1Q24, driven by strong oil trading and higher refining margins. On the other hand, miners, Antofagasta and Glencore both declined 1.7% each.

The FTSE 100 index advanced 0.6% to close at 8,172.15.

Asian markets are trading higher this morning. In Japan, the markets are closed today on account of a public holiday.

In Hong Kong, insurance company, AIA Group has advanced 2.5%. On the other hand, pharmaceutical company, Sino Biopharmaceutical has declined 1.4%.

In South Korea, cosmetic company, paper company, Shin Poong Paper Manufacturing has jumped 5.4%. On the contrary, chemical company, ISU Specialty Chemical has plunged 7.4%.

Yesterday, the Nikkei 225 index declined 0.1% to close at 38,236.07. Today, the Hang Seng index has gained 1.1% to trade at 18,412.59, while the Kospi index is trading 0.2% higher at 2,688.59.

At 05:30 today, Brent prices rose 0.2% to trade at $83.86/bl.

Yesterday, Brent prices rose 0.3% to settle at $83.67/bl, amid expectations that the US might begin replenishing its strategic reserve.

At 05:30 today, gold prices declined 0.1% to trade at $2,301.48/oz. Yesterday, gold declined 0.6% to close at $2,303.29/oz, as prospects of interest rate remaining higher for longer weighed on investor sentiment.

Yesterday, copper declined 1.5% to close at $9,642.29/mt. Aluminium closed 1.7% lower at $2,537.35/mt.

Market update by Anchor Capital

Sifiso Nkambule, assistant portfolio manager at Efficient Wealth

Globally, investors are now also concerned about the Environmental, Social and Governance (ESG) aspects of their portfolios.

As investor scrutiny on sustainability grows, companies go through great lengths to report on their sustainability Assessing ESG's real-life impact can help investors understand the importance of including it into a portfolio and choosing the best option from the various solutions available.

Poor corporate governance's cost to stakeholders have been documented through various observed losses. A US investigation into Glencore in 2018 and, more recently, Archer Daniels Midland's accounting irregularities, both wiped out more than $7 billion in market cap. Then there is also the more severe case of Wirecard.

More concerning are the growing costs to society and to shareholders due to environmental changes like climate change.

Insurers such as Munich Re and Swiss Re tallied losses related to climate change to between $76 billion and $108 billion. It remains to be seen how food and beverage companies will navigate the impact of climate change on soft commodity prices.

Cocoa has been a serious talking point for much of the year, with the US futures rising more than 200% over a one year period. As countries like Vietnam and Indonesia battle heatwaves, prices of coffee have responded to the potential of lower exports with the London robusta coffee futures rising more than 60% over a one year period.

Ignorance can be fairly expensive, so it is critical that investors that the consideration of ESG seriously. Peabody Energy's bankruptcy in 2016 is an example of how the war on coal can impact a company. This is a testament to how the market is changing. In future, investors will be rewarded if they investigate solutions that include innovative companies that provide future sustainable solutions.

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