Jane: [00:00:00] Hello and a very warm welcome to the Sustainable Growth Podcast. I'm your host, Jane Goodland. In each episode, we talk to a leading expert about a wide range of topics that touch on sustainability, business, and finance. This week I had the pleasure of chatting with Punki Modise, who is the Group Chief strategy and sustainability officer and member of the Group executive Committee at ABSA Group, which is one of the largest Pan-African banks serving business and individual customers in 12 countries. She's been with ABSA for over 15 years, during which time she's held multiple senior positions, and before that she worked at Standard Bank, FEDSAW and PwC, gaining extensive experience in corporate finance, risk management, financial reporting and regulatory compliance. Right, let's hear what she had to say. Hi, Punki. How are you doing? It's so good to see you. Thank you so much for joining us today. And you're dialling in from Johannesburg I understand.
Punki: [00:00:58] Absolutely. Joining from the cold Johannesburg this afternoon.
Jane: [00:01:02] Yeah, well I think your version of cold and my version of cold is probably very different. But, you know, we can debate that later. Now, before we get down to the business, punky, I did spot on your LinkedIn profile that you are a passionate baker, so I am intrigued. Tell me more. What's your signature bake?
Punki: [00:01:19] Yeah, my signature bake is. I would say it's scones.
Jane: [00:01:23] Oh, nice.
Punki: [00:01:24] Yeah. I love my tea. So scones go very nicely with my tea.
Jane: [00:01:30] Now, the question I have is, are you a savoury scone, lady, or are you a sweet scone lady?
Punki: [00:01:37] Sweet scone is the thing.
Jane: [00:01:39] Okay, well, I'm with you.
Punki: [00:01:40] Yeah. As a lady, I'm a sweet tooth person. Okay, she's going to go. Go along quite nicely.
Jane: [00:01:47] Excellent. You and I can be friends then. That's good. I'm glad that we've got that out of the way. Cool. So, as the introduction covered, you are with ABSA Group. So we know that it's a kind of a leading African bank but tell us a bit more about the group. And also I'm really intrigued as to why sustainability is relevant to the organisation's value creation story.
Punki: [00:02:13] Yeah, absolutely. My sense is, ABSA to a large extent, we're purpose driven Pan-African financial services group. We headquartered in South Africa with presence in 12 countries and serving, you know, millions of retail business as well as corporate clients. So for us, the for sustainability isn't a nice-to-have. It's the foundation of long-term value creation. So as a financial institution, particularly here on the continent of Africa. Our success is directly linked to the prosperity of the communities we serve. And if our economies aren’t thriving, neither will we as a financial institution thrive. So that's why we've embedded sustainability in our corporate strategy, not as a side project, but as one of our five strategic pillars. So we call it an active force for good in everything that we do, which broadly means decisions, every decision I think that we take is measured not just by the profit, but by the value it creates for people, for society, as well as for the planet. But maybe most important also, we are deeply customer obsessed because we believe that our customers are at the heart of how we create value. So that means really when we design products and services that solve real problems, from enabling a small business in Kenya to access working capital at the same time to helping a young family, for example, in South Africa, buy their first home. When we create that genuine value for our customers, we create long term value for our shareholders and society in particular.
Jane: [00:04:07] You kind of raise a good point there that your bank is serving both the corporate side and business banking, as well as individuals and families through kind of regular kind of personal banking, but also investment and wealth management too. So you have that kind of really wide view of your customer lens. I love the idea of being customer obsessed. I think that's absolutely should be all organisations mantra is really, shouldn't it, in terms of serving the customer, but in terms of, I guess, thinking about sustainability and what it means for the organisation. Do you think that your approach, at ABSA, differentiates you from other financial institutions kind of internationally or even indeed within Africa? Do you think this is kind of something unique to your organisation?
Punki: [00:04:56] Yeah, I would say that our approach is truly a differentiated one. And for me, I think the difference is really in how central the social lens is to our decision making. You know, as an organisation, and I think to that effect, if I look at some of the deals and projects that we look at, there are instances where we would walk away from some of the deals if they don't make social sense. So if I were to give you an example, if a project delivers very strong returns but displaces, I would say communities without adequate protection, their livelihoods and dignity. For us, we see that as harmful. And so a no answer will certainly come to that project. So coming back again to our customer obsession that drives this approach and we measure in particular our success not only by how returns, how we deliver maybe returns to shareholders, but to a large extent also by how well we help customers succeed on the back of that. So we look at whether, if we're enabling, for example, an SME in Kenya to scale their operations or we supporting a renewable energy developer in South Africa to bring clean power to communities. So when our customers prosper, we do believe that we grow stronger as an organisation on the back of that, and it's communities really that make our banker tick. And that's where the shareholder also connection comes in for us. So we don't see, I would say, social goals and shareholder returns as competing priorities. We see them as deeply connected on the back of that. And also if you look at long term shareholder value creation, we do believe that it depends on resilient economies, but also stable societies and thriving customers. On the back of that, so in our context, the social dimension therefore, is not just good ethics, it's good business. It makes business sense.
Jane: [00:07:05] And is that something which your shareholders want to see? Is that a conversation they're engaged in and receptive to, or is it just kind of like an expectation?
Punki: [00:07:14] No, shareholders are deeply engaged in that conversation. And I can tell you, it's actually surprised the last time around when we had like one of the investor rounds and we were chatting to some of the shareholders, and they were just pleased to see how much we are infusing the social angle into how we think about the strategy of the business. So they are very much engaged in that, because also they understand that the sustainability of the capital that they invest into our entities is dependent on the communities of the society thriving. So really, the two have to work hand in glove.
Jane: [00:07:53] So, Punki, you said that you measure the social side of the equation when you're talking to shareholders and thinking about kind of what business to right. To what extent do you actually sort of have KPIs or metrics or how do you measure that social angle to what you do?
Punki: [00:08:11] Yeah, that's actually a very important question. The one of measurement, I think the best place to start is largely to say this is also an area that is progressing. It's a journey, but we've started that journey just by looking for what kind of impact are we creating on the ground, because we fully understand the fact that sustainability, you've got to look at it from three lenses. So yes, it's risk and reward, but also the other element is around the impact. So, at the moment we are developing a framework as an organisation to really, truly measure the impact that we are making on the ground. But we're not just waiting for that model to develop. At the same time is our ESG data capability is giving us some of the measurements that we require, to for us to be able to effectively demonstrate the impact that we are creating to the greater society out there.
Jane: [00:09:10] Excellent. Good to hear. So we've talked about the social angle being particularly important to ABSA's work. And of course we talk about just transition when we're thinking about climate transition in particular. Are you able to help us kind of understand that in real terms, maybe through an example of what is just transition look like for a bit of a bit of business for Alberta, for example?
Punki: [00:09:35] Yeah, I should say that for us really just transition is about I would say it means moving forward towards a low carbon economy without leaving communities behind. So on the back of that, then it's all about balancing, the environmental goals as well as the social realities on the ground. If I were to give you maybe an example, a coal plant, that closes, that's good for emissions overall, but it could be devastating for the local economy unless we think about reskilling of workers that were part of that coal plant, unless we also think about how do we reskill the SMEs on the ground and create alternative livelihoods. So yes, we finance renewable finance projects or renewable projects, but we also invest in the human side of the transition. Hopefully that gives you some sense, but maybe, also the other dimension to add Jane, is many, I would say, understand particularly, outside of the continent, this notion of just transition, perhaps in theory. But the practical realities are really hard. My sense is that Africa's energy journey can't simply follow other continents pathways. It has to follow its own pathway, and our timelines, infrastructure and societal needs broadly are different. And we cannot ignore that because, for people to transition, they have to live today. So we have to protect the livelihoods today whilst we help the people to transition over time.
Jane: [00:11:24] So that leads me on to my next question, which is really about looking at kind of climate transition globally and, the alliances that have been springing up and in some cases shrinking the net zero alliances. Now, I know that you guys are very committed to climate transition and the financing of it, but you deliberately chose not to be part of that Net Zero Alliance initiative. Can you tell me a bit more about your thinking behind that?
Punki: [00:11:53] Yeah, I would say that we to your point, I mean, we truly are fully supportive and committed to the principles of net zero. And we've also adopted many of them in our own policies in terms of how we do due diligence and also vet some of the projects. But the alliance timelines and frameworks, in instances, you find that they are too rigid for the realities of African economies. So we therefore need an approach that works for the people of the continent, those that are on the ground. So my sense, therefore, is that a one size fits all model does risk pushing vulnerable communities in particular further behind. So instead we've built a context-specific pathway, but we are equally aware of the fact that it's good to have an ambition in its intent. So from that perspective, whilst I think we do consider all of these principles, we want to stay true, I think to sustainability because we are clear that whilst we must, I think as communities transition, but we must transition safely in a manner that is nurtured and in a manner that is not forced, because, when you try to force people into something that they don't believe in or that they can see it's going to destroy their own livelihoods, it becomes hard for them to see the case for change. So yes, the case for change is clear in terms of climate and all of those issues, but at the same time is people have to live and we have to work with them appropriately so, yeah. I would say we are really conscious of our own realities and making sure that the people on the ground continue to thrive despite the transition that needs to happen.
Jane: [00:13:49] Which comes back to the social angle, doesn't it, in terms of being so important and context specific. So that makes total sense to me. I mean, obviously climate transition and kind of moving towards a lower carbon economy takes capital. We're well aware of that. But what are some of the African specific challenges do you think about getting that capital invested either from international inward investment or domestically?
Punki: [00:14:15] Yeah, I think I mean, the first place maybe to start is broadly, Africa does not have deep capital markets. So that becomes almost like the first challenge. But within that context I actually see three maybe critical challenges. So the first one is around perceived risk. Many investors overestimate. I think the risk in the African projects to a large extent. And then I think secondly, it's the issue of currency volatility as well as infrastructure gaps, which can make long-term investments very difficult and also costly for that matter. And then finally, I think it's in limited bankable projects availability, not because the ideas aren't there, but because technical support as well as early stage funding are lacking overall. So for us, therefore, as an organisation here at ABSA, how we think about addressing these. First of all, we largely focus on how do we de-risk the projects working in conjunction with institutions like the world Bank. Secondly, I think we use blended financing as one of the tools to provide funding. And then finally, it's providing the technical support so that more ideas, can reach investment stage. And we do that also working with institutions like the IFC, because those are the institutions that really help us to move forward as far as this agenda is concerned.
Jane: [00:15:51] And you mentioned infrastructure gaps. Can you just kind of explain a bit more what you mean by that?
Punki: [00:15:58] Yeah, basically infrastructure gaps talks to the issue of energy poverty. If you think about it the continent of Africa has about 600 million people that don't have access to electricity or clean energy. So energy poverty is a problem. And this is caused by the fact that the infrastructure is not at the level at which it can support those people.
Jane: [00:16:25] Excellent. So, the capital investment requirements are quite obviously different. And, the priority is about getting people connected with power, etc and then also thinking about how that can be low carbon and renewable at the same time. So quite unique challenges on the continent there.
Punki: [00:16:42] Absolutely, absolutely. And I think I mean, the big thing also, Jane, is how we also think to all your question on the issue of just transition people burn wood, so it's a balance between burning the wood and also maybe using gas, for example, as an energy transition system. So those are all the mechanisms, I think, that we use really to help the continent to transition safely. And to your point around the issue of infrastructure gap when the infrastructure is not there. We've got to find ways of then how do we get people out of those tools, like, out of wood burning to like using gas more frequently because that's a lot more cleaner in its energy source, relative to people burning wood, burning coal on the back of that.
Jane: [00:17:37] So I wanted to move on to policy and the role of government policy. And I guess your perspective in the sort of wider context where we're seeing quite a lot of geopolitical change, which is in turn having some impact on the global policy environment associated with sustainable development. But from your perspective, what type of policy structures and frameworks are either sort of doing well in the African context or what is it you're hoping for, what's the kind of the policy environment with respect to sustainability?
Punki: [00:18:15] Yeah. So I would say maybe a best place to start is really confirming that policy is so critical in this space. My sense is that without it, the market cannot scale. Sustainable finance on the back of that. But right now, I mean we see lots of fragmentation happening. For example, there's multiple and sometimes I would say conflicting taxonomies, you know, for defining green investments as an example. And that makes it really hard to mobilise capital across borders. So from our side, we work closely with policymakers to try and advocate for harmonisation of these policies, because with greater clarity, there's a greater chance of attracting investments to our market. So I would say that really the alignment of and harmonisation of policies is a great lever that if it can be unlocked, we should be able to see sustainability thrive on the back of that.
Jane: [00:19:24] Excellent. So we've got time for one last question, and I'm curious to know kind of what the future holds for ABSA in this context. So let's do a bit of a crystal ball gazing. It's 2030. You're kicking out the park. What's happening? What's does success look like in 2030, which is actually only five years away, which is absolutely incredible.
Punki: [00:19:49] Yeah. Our intention is clear. I think for us, by 2030, we do aim to be the go to partner when it comes to sustainable finance on the continent. And that means really having a truly measurable impact for millions of people out there that require to be financially included on the back of that. The other aspect is, we want to see tangible progress, especially as far as it relates to women and youth empowerment, because for us, that will be a clear role that we can demonstrate that we are a truly African financial Institution, and we can help the economies leapfrog to a large extent through this clean energy transition. We also want to prove something important. On the back of that, and that is that sustainable finance on the continent is not just good for the continent, but it's also good for global investors too.
Jane: [00:20:45] Yeah. I love it. Well, what a perfect way to finish. And I truly hope that does become the reality of you guys being the go to partner for sustainable finance. Punki, thank you so much for your time today. And if I'm being a bit cheeky, then if I do find myself in Johannesburg, then I'm going to come knocking and hopefully we can have a cup of tea and a nice scone.
Punki: [00:21:06] Absolutely.
Jane: [00:21:10] Thanks again for your time. It's been great talking to you.
Punki: [00:21:13] Thank you.
Jane: [00:21:14] I hope you enjoyed that episode with Punki from ABSA. And if you did, then please don't forget to follow us and rate us on Spotify, Apple Podcasts or any other platform you use. If you've got questions, comments, or someone you'd like us to talk to, then do get in touch by email at FMT@lseg.com. That's all from me. But watch out for the next episode very soon.
