ESG issues are critical to the South African economy and society, with ESG-related corporate failures prompting the country’s leaders to take action, including more investment in sustainable energy as part of the government’s National Development Plan. The National Treasury has also convened a Sustainable Finance Working Group to ensure that sustainability themes are reflected in national legislation and regulation.
The roadmap makes recommendations to ensure South African institutional investors understand that their fiduciary duties require them to consider material ESG issues in their investment processes and decision making. This builds on South Africa’s long-history of pro-ESG initiatives, most notably in the form of Regulation 28, the Code for Responsible Investing in SA, and the pioneering work of the Johannesburg Stock Exchange in its support of integrated reporting by listed companies.
“This roadmap will inform the PRI’s work plan for South Africa in the next few years,” said Adrian Bertrand, head: Africa & Middle East, PRI.
“We are most grateful to our many valued signatories and stakeholders consulted in the development of this roadmap.
“The PRI is committed to partnering with our signatories and stakeholders to implement the recommendations of this roadmap and welcome further inputs as to how best we can collaborate as an industry to achieve this in South Africa.”
The roadmap seeks to ensure that the effect of these initiatives is reflected in the day-to-day investment practice of South African pension schemes and asset managers. This requires interventions in four categories: regulatory guidance (building on Regulation 28 and PF-130); enhanced stewardship (enabling CRISA’s role); investor education (ensuring ESG is embedded into trustee core competencies); and corporate reporting (ensuring that material ESG factors are reported by South African corporations).
In addition, the roadmap contains a new trustee training initiative. The initiative, sponsored by The Generation Foundation, PRI and UNEP FI, will make the PRI Academy’s new trustee training module available free of charge to 70 South African trustees. This is the PRI’s practical response to scale and capacity issues that we have seen in every market in which we have worked.
The recommendations in the roadmap draw on 25 interviews with key South African stakeholders. The roadmap also identifies policy examples from other mature financial markets, such as the US, UK and Canada which have been the subject of other country roadmaps of our fiduciary duty project.
“GEPF is delighted to endorse the recommendations of this Fiduciary Duty Roadmap for South Africa. The GEPF Board of Trustees commits itself to working with the FSB, Batseta, ASISA, PRI and other stakeholders to implement the recommendations of the report. Retirement fund members and beneficiaries in South Africa will most certainly benefit from improved regulatory guidance on how retirement funds can become more active in addressing environmental, social and governance (ESG) issues. We look forward to engaging with South Africa’s institutional investor community to further support trustee education initiatives addressing fiduciary duty, responsible investment and better stewardship of retirement fund assets.”
Dr Renosi Mokate, Chairman: GEPF Board of Trustees; and PRI Board member
“Responsible investing has become a non-negotiable in the context South Africa’s sustainable development path. The unacceptable levels of economic inequalities, our commitment to addressing climate change, all necessitate the need for an active investor base that is committed to integrating environmental, social and governance issues in their investment strategies. This report’s observation is spot on - we have adequate policies and frameworks but we are lacking on action - thus the recommendations ought to be taken seriously by all key stakeholders within our financial system. As CRISA we have made similar observations and we are activating plans to have a dedicated secretariat to support the work of the CRISA committee. ”
John Oliphant, Chairman: Code for Responsible Investing in SA (CRISA)
“The Batseta Council of Retirement Funds for South Africa, as the standard setting professional body for South African retirement funds, welcomes the release of this South Africa roadmap. Being a responsible investor is at the heart of being a retirement fund trustee in South Africa. As Batseta, we are adamant that our members must never abdicate their fiduciary duties of skill, care, prudence and diligence. We endorse the recommendations provided in the roadmap and commit to working with all retirement fund stakeholders in South Africa towards implementing the roadmap recommendations. We have made this commitment towards encouraging funds to adopt responsible investment practices in order to secure a sustainable future for all of South Africa’s retirement fund beneficiaries.”
Anne-Marie D’Alton, CEO: Batseta Council of Retirement Funds for South Africa