There is a growing consensus on the need for sustainable and impact investment products

As the 7^th edition of the Pension Funds and Alternative Investments Africa Conference (PIAFRICA) 2024 concludes, Soomilduth Bholah, the Minister of Financial Services and Good Governance of Mauritius, shared insightful reflections on the conference’s proceedings. The event, which focused on pivotal issues such as pension funds, regulatory compliance, and impact investing, provided a platform for industry leaders to navigate the complexities of the evolving financial landscape.

The Minister highlighted the commitment of participants to shaping a resilient and prosperous future for pension fund management and alternative investments. He acknowledged the global challenges faced by the alternative fund industry, encompassing the aftermath of the COVID-19 pandemic, geopolitical tensions, and market volatility. Despite these challenges, fund managers exhibited adaptability by recalibrating portfolios to include areas like illiquid credit, real estate, private equity, pension funds, venture capital, and special situations.

“Many of the largest investors are public pensions, endowments and foundations. They have their own environmental and socially responsible commitment to fulfil. There is also an overall consensus that more emphasis needs to be laid on sustainable and impact investment product. There are, however, various viewpoints as to what would be the best pathway to adopt such practices. This is because there are growing external risks, such as climate change and food insecurity. Many countries of the world are faced with an ageing and lower working population to support the addition of more retirees. Mauritius, with regard to its retirement system, faces the same challenges. Pension funds are suffering from widening deficits. This is a result of increased longevity risk, as well as lower returns from the volatile performance of traditional asset classes such as equity, fixed-income, real-estate and cash equivalents,” the Minister stated.

Addressing the low-interest-rate environment prevailing since 2009, the Minister stressed the impact on investment funds, insurance funds, and pension funds. Looking ahead, he emphasized the importance of these segments being prepared to weather future challenges while contributing to Africa’s growth and prosperity.

Highlighting Mauritius’ role in this context, Mr Soomilduth Bholah discussed the creation of a dedicated Environmental Social and Governance (ESG) Framework for Africa. This framework, tailored to African realities, aims to provide assurance to investors and Development Finance Institutions (DFIs) regarding proper project monitoring. Mauritius, positioned as an International Financial Centre (IFC), seeks to drive impactful investment into mainland Africa by incorporating ESG principles into projects, particularly those supporting green funding sources.

“A robust and well-designed financial sector becomes paramount as Africa gears up to harness international resources and foreign investments. And this will not be possible if sustainability is not embedded in this journey. As per the Capital Economics study which was conducted in 2021, the African continent needs around USD 350 Billion to unlock sustainable projects on the continent. This is the reason for which Mauritius is in process of creating a dedicated Environmental, Social and Governance Framework for Africa. The framework is designed to be a document for Africa, by Africa. In line with African countries’ realities, it will also provide the comfort to the investors, or Development Finance Institutions (DFIs), that the project is being properly monitored,” the Minister stated.

Many countries of the world are faced with an ageing and lower working population to support the addition of more retirees. Mauritius, with regard to its retirement system, faces the same challenges

 

Drawing attention to the global shift towards aligning business models with the UN Sustainable Development Goals, the Minister emphasized the importance of leveraging technology in the financial services sector, adding that “the Mauritius IFC, with over 30 years of experience, has diversified its offerings, introducing innovative products such as the Variable Capital Company (VCC) license and Virtual Asset and Initial Tokens Offerings (VAITOS) license.”

Soomilduth Bholah also lauded Mauritius’ efforts in FinTech and fund management, highlighting initiatives like the regulatory sandbox regime, Fintech Innovation Hub, and Digital Lab. He mentioned Mauritius’ pioneering role in introducing the digital custodian license and Security Token Offering, positioning the country as a driving force in the FinTech arena.

Looking at Africa’s future, with a projected population of over 2 billion by 2050, and substantial consumer and business-to-business investments, the Minister underscored Mauritius’ pivotal role. With USD 82 billion in investments, representing 9% of overall foreign investment into Africa, Mauritius serves as a stable, predictable, and sustainable jurisdiction, which remains dedicated to fostering collaboration, sharing experiences, and contributing to Africa’s economic growth.

Soomilduth Bholah expressed appreciation for PIAFRICA 2024 as a pivotal event fostering collaboration and innovation within the pension funds industry. As the curtain falls on this year’s edition, he hopes the networking and discussions held will lead to comprehensive strategies to consolidate the sector for sustained growth and development.