Local Sector Initiatives

Banking Association South Africa (BASA) – Sustainable Finance Principles

BASA has established a Sustainable Finance Committee to promote understanding and best practice nationally within the sector. Amongst other initiatives, the Sustainable Finance Committee has developed Principles for managing Environmental and Social Risk. The Principles recognise the role that financial institutions can play in the protection, promotion and fulfillment of social, economic and environmental rights in South Africa by conducting and reporting on their operations, business, lending and investing practices in a sustainable manner. As responsible corporate citizens, BASA members commit themselves to these Principles.

ESG considerations in Regulation 28 of the South African Pension Funds Act

Updated Regulation 28 of the South African Pension Funds Act, which became effective in July 2011, includes a new requirement for pension funds to consider environmental, social and governance (ESG) issues when assessing factors that materially affect the sustainable long-term performance of pension fund assets.
An industry-wide consultation was conducted from 2011 to 2013 to develop practical guidance on Responsible Investment and Ownership to help South Africa pension funds to implement the new requirement.

The Code for Responsible Investing in South Africa (CRISA)

Launched in July 2011, the Code for Responsible Investing in South Africa (CRISA) consists of 5 principles that provide guidance on how the institutional investor should execute investment analysis and investment activities with a view to promoting sound governance. The effective date for reporting on the application of the code was 1 February 2012. Principle 1 requires institutional investors to develop policies on how they incorporate sustainability considerations, including environmental, social and governance (ESG) aspects, into investment analysis and activities. Institutional investors should ensure that this policy is implemented and establish processes to monitor compliance with the policy. Through the Code, South Africa became the second country after the UK to formally encourage institutional investors to integrate into their investment decisions sustainability issues such as environmental, social and governance (ESG). The Code is endorsed by the Institute of Directors in Southern Africa, Batseta, the Association for Savings and Investment South Africa, the Financial Services Board and the Johannesburg Stock Exchange.

Sustainable Returns for Pensions and Society

Launched in 2011, the Sustainable Returns for Pensions and Society project  an initiative of Batseta (Council of Retirement Funds for South Africa), with support from industry stakeholders and IFC, set out to empower South African retirement funds to comply with revised Regulation 28 and the CRISA code. A comprehensive industry engagement informed the release in September 2013 of “Responsible Investment and Ownership – A Guide for Pension Funds in South Africa”.
In consultation with the National Treasury and the Financial Services Board (FSB), the Guide included recommended Action Steps for pension funds to put in place policies and systems for responsible investing.

Johannesburg Stock Exchange – JSE Responsible Investing Series

The JSE was the first emerging market stock exchange to form a Socially Responsible Investment Index (SRI Index) in 2004. In June 2015, JSE partnered with FTSE Russell, the global index provider, to progress the JSE’s work in promoting corporate sustainability practices over the last decade. The JSE has adopted the FTSE ESG Ratings process to create the following two indices, launched on 12 October 2015:

  • The FTSE/JSE Responsible Investment Index: A market-cap weighted index calculated on an end of day basis – benchmark; Comprises all eligible companies who achieve a FTSE ESG rating of 2.0 or above.
  • The FTSE/JSE Responsible Investment Top 30 Index: An equally weighted index calculated on a real time basis – tradable; Comprises the Top 30 companies ranked by FTSE ESG Rating.