South Africa launches responsible investing code for institutional investors

New voluntary Code for Responsible Investing in South Africa (CRISA) unveiled

South Africa today launched a new five-point, voluntary code to encourage institutional investors to integrate environmental, social and governance (ESG) issues into their investment decisions.

The Code for Responsible Investing in South Africa (CRISA) joins similar initiatives like the UK’s Stewardship Code and the recent engaged share ownership guidance from the Netherlands’ Eumedion in formally encouraging responsible ownership.

“The Code is the next step in ensuring that institutional investors actually implement policies that guide their day to day actions when it comes to responsible investing,” said John Oliphant, the Head of Investments at the R700bn (€71bn) Government Employees Pension Fund (GEPF), who chaired the committee that drafted the Code last year.

“CRISA will empower the beneficiaries of investments made by institutional investors like pension funds to ask the right questions and to select responsible custodians for their investments,” he added.

CRISA, which will operate on an “apply or explain” basis, provides investors with guidance to implement the King Report on Corporate Governance South Africa (King III) as well as the United Nations-backed Principles for Responsible Investment.

A feature of the code is its focus on voting disclosure. It calls for detail on the approach to voting at shareholder meetings, including the criteria used in voting decisions and the “public disclosure of full voting records”.

“Non-disclosure of voting records by an institutional investor and its service providers precludes the investee company the opportunity to engage with the institutional investor or its service providers regarding the vote exercised,” it states.CRISA has been endorsed by the Institute of Directors in Southern Africa (IoDSA), the Principal Officers Association (POA) and the Association for Savings and Investment South Africa (ASISA). There’s also backing from the Financial Services Board (FSB), the Johannesburg Stock Exchange (JSE), and the PRI.

“It is important that pension funds and investment managers operating in South Africa understand clearly their responsibilities and invest for the long-term,” said PRI Chairman Wolfgang Engshuber.

The code not only applies to institutional investors such as pension funds and insurers but also to service providers such as fund managers and consultants. It comes into force on February 1 2012.

The principles call on investors to:

  1. Incorporate sustainability considerations, including ESG, into investment analysis and investment activities.
  2. Demonstrate acceptance of ownership responsibilities.
  3. Consider a collaborative approach to promote acceptance and implementation of the CRISA principles.
  4. Recognise the circumstances and relationships that hold a potential for conflicts of interest.
  5. Be transparent about the content of their policies, how the policies are implemented and how CRISA is applied to enable stakeholders to make informed assessments