“The logic underpinning CRISA is that investors should take account of the impacts of how the company makes its money on the environment, society and the economy. Not to do so would amount to a failure of the director’s duty of care in the changed world of the 21st century.”

Professor Mervyn King

Drivers for Action

While there was a general agreement that there has been significant progress in relation to policy – one interviewee commented that ‘all of the tools and policy measures necessary to implement responsible investment are in place or available’ – there was also a general sense that enforcement is lagging. Interviewees noted that South African pension funds are very responsive to the law, and that, ultimately, the law is likely to be the most effective vehicle for change. They acknowledged that the introduction of new legislation would take time but suggested, at least as an initial step, that interpretative guidance on issues such as reporting and board competence from the FSB would have a similar effect (albeit acknowledging that such circulars do not have the same standing as statutory instruments).

Barriers to Progress

Interviewees identified a number of distinct barriers to progress:

  • The lack of regulatory guidance: While Regulation 28 provides a very helpful in-principle obligation to implement ESG considerations into investment decision-making processes, further guidance is required on how this might be implemented in practice.
  • The lack of reporting requirements: There are no requirements on retirement funds to report regularly to the FSB on how they have implemented the requirements of Regulation 28.
  • The lack of effective oversight of the implementation of CRISA or of the ESG requirements of Regulation 28: The lack of oversight and the lack of consequences for non-compliance has resulted in ESG integration and responsible investment remaining a low priority for most retirement funds.
  • The lack of transparency in the investment industry: Funds are generally not required to publish, even if only to their own members, information on how they address ESG issues in their investment practices and processes.
  • Lack of board capacity and expertise: The Pension Funds Act was amended in 2014 to provide that board members of funds must attain and maintain a certain skill level which is to be prescribed by the FSB. At the time of writing (August 2015), it is not clear what emphasis will be placed on ESG issues in the criteria or guidance to be issued by the FSB.
  • Limited regulatory resources and competing regulatory agendas: The regulators of the South African pensions industry are faced with a series of major challenges (e.g. the need to consolidate the industry, the need to protect beneficiaries’ interests), of which ESG integration and responsible investment is just one.
  • A lack of robust evidence on the investment value of ESG issues.


In addition to the global recommendations, we recommend that:

Financial Services Board

The Financial Services Board should:

  • clarify that compliance with the requirements of Regulation 28, in particular those relating to ESG issues, should be seen as an integral part of the fiduciary duties imposed by the Pension Funds Act;
  • clarify that responsible investment includes ESG integration, engagement, voting and public policy engagement;
  • explicitly address ESG-related competence, expertise and skills in forthcoming guidance on pension fund board education;
  • require asset owners to prepare a public, annual report describing how they have integrated responsible investment into their investment policy statements, practices and processes, and their investment manager selection, appointment and monitoring processes.

Code for Responsible Investing in South Africa (CRISA)

The Code for Responsible Investing in South Africa (CRISA) Committee should strengthen oversight of the code by conducting more detailed analysis of current practice, analysing the investment and other outcomes that result from the code.

Read Fiduciary duty in the 21st century: South Africa roadmap