The discussion around sustainable investment is gaining momentum as organizations and individuals recognize the need to align economic growth with environmental stewardship, social responsibility, and strong governance.
In a webinar organised by Uganda Institute of Banking and Financial Services (UIBFS) in partnership with URBRA, discussions dwelt on how Uganda’s retirement benefits sector, now worth UGX22 Trillion, could be leveraged to ensure sustainable investment.
One of the pressing concerns raised was the paradox of investing in industries that harm society and the environment. For instance, retirement benefit schemes often fund companies involved in tobacco and alcohol production, prioritizing financial returns over the long-term health and well-being of the very people they serve. The key speaker Mr. Othieno Japheth, Assistant Manager of Pension Administration & Consulting at Enwealth Financial Services Limited aptly put it, “we get the money, yes, but we kill the people.”
This contradiction equally extends to governance issues. Instances of corruption and mismanagement within the pension space not only erode trust but also squander resources meant to support future generations. Broken values—evidenced by inflated property valuations and investments driven by kickbacks—underscore the need for stricter oversight and accountability to protect retirement savings.
Despite the governance and investment challenges, Uganda’s retirement benefit schemes can play a transformative role in economic development. Strategic investments in infrastructure, agriculture, and manufacturing could drive growth and reduce dependency on foreign debt. For instance, Public- Private Partnerships (PPPs) funded by pension schemes can focus on specific projects like building roads or supporting local industries to refine and export value-added products. This shift would not only create jobs but also curb the “imported inflation” that arises when raw materials are processed abroad and sold back to Uganda at higher prices.
By investing in these areas, retirement funds can create opportunities that improve the financial wellbeing of retirees while contributing to national development. Ensuring that these investments yield tangible benefits for both contributors and the broader community is essential for sustainable growth.
To ensure lasting impact, retirement benefit schemes must embrace sustainable investment practices, focusing on three key approaches:
Screening Investments for Social Responsibility (CRI): Before committing funds, pension schemes should evaluate companies based on their environmental, social, and governance (ESG) performance. Are these companies building or destroying the planet? Are they treating their employees and communities ethically?
Impact Investments: Beyond profits, the focus should be on the long-term benefits of investments. For example, funding green energy projects or supporting local manufacturing industries can create jobs, reduce carbon emissions, and enhance community well-being. These actions directly impact the financial security and quality of life for retirees.
Green Bonds: Both government and private sector entities can issue green bonds to fund eco-friendly initiatives. Uganda has the potential to replicate successful models from neighbouring countries like Kenya, where over-subscription of infrastructure bonds reflects strong investor confidence.
The ultimate goal is to transition retirement benefit schemes from merely surviving to achieving significance. While survival ensures that contributions are collected and invested responsibly, and success measures returns, significance looks at the broader impact on society. Imagine a future where pension schemes proudly report not only financial growth but also their contributions to renewable energy, improved infrastructure, and gender equity.
By achieving significance, retirement schemes ensure that retirees benefit from not just monetary returns but also a healthier, more stable society. This dual impact solidifies their role as critical players in national development.
Therefore, Policymakers in the financial services sector, regulators, and industry leaders must work together to expand investment guidelines and encourage innovative financing mechanisms like ESG-focused investments and green bonds. Institutions should integrate sustainability into their charters and adopt robust governance practices to restore trust and accountability.
Retirement schemes can also educate their members on the importance of sustainable investing to build collective commitment that can drive economic growth, protect the environment, and uplift communities—creating a legacy of significance for generations to come. As the adage goes, “We do not inherit the earth from our ancestors; we borrow it from our children.” Let us ensure we leave behind a world worth inheriting, not just for retirees but for everyone who will follow.