Driving implementation of South Africa’s pension fund regulations - By Robert Black and Dr Rory Sullivan
Driving implementation of South Africa’s pension fund regulations - By Robert Black and Dr Rory Sullivan
South Africa has long been seen as a leader in sustainable finance regulation. Regulation 28 of the Pension Funds Act and the pioneering Code for Responsible Investing in South Africa (CRISA), first launched 13 years ago, being notable examples.
These interventions have resulted in many pension funds integrating ESG factors into their Investment Policy Statements and investment strategies. However effective implementation has remained a challenge. This is due to a combination of factors including a lack of resources in pension funds and the technical complexity of ESG integration.
Over the past year, Chronos has worked with the International Finance Corporation (IFC, part of the World Bank Group), Batseta (a local non-profit organisation supporting South African trustees) and Kigoda Consulting to build sustainable finance capacity in South African retirement fund trustees and to co-design a new tool that can break the implementation of responsible investment into bite-sized chunks of practical action.
We have contributed to training courses and, more recently, to the updating, development and relaunch of the Batseta hosted RIO website (Responsible Investment and Ownership), a one-stop platform to support South African retirement funds with the integration of ESG considerations into their investment processes.
The renewed website includes:
· Updated explainers on ESG, investment strategies, regulations and frameworks.
· Practical guidance for retirement funds on how to integrate ESG into investment policy statements, investment decision-making and reporting.
· A new self-assessment tool that enables retirement fund trustees in South Africa and those assisting them to quickly and easily assess their progress in implementing ESG requirements.
The self-assessment toolkit is particularly important because it allows trustees to assess their approach to responsible investment, and to assess their performance against ESG reporting requirements such as Regulation 28 of the Pensions Funds Act. It allows them to identify areas where they are effectively implementing their commitments and obligations, and to pinpoint areas for improvement.
Through a series of core and additional questions the toolkit offers a comprehensive evaluation of a fund's integration of responsible investment considerations into its investment processes and helps trustees generate a clear roadmap to progress areas where attention is required.
The RIO Guide website complements the toolkit by providing tools and guidance to help the full spectrum of South African retirement funds to take the necessary steps to integrate ESG and promote a more robust sustainable finance system in South Africa.
Chronos comment
In some ways, there is nothing new about a guidance document on RI implementation – there are plenty of guidance documents already. But what is unique about the content on the new RIO site and the self-assessment toolkit is that both have been tailor-made for South Africa. When developing the guidance and the self-assessment tool. we ensured that we took both the South African context and pension rules into account, and that they paid particular attention to the challenges faced by resource-constrained principal officers, trustees and fund fiduciaries.
The result is a bespoke tool that we hope can make South Africa not just a leader in sustainable finance regulation, but also in sustainable finance implementation.
Visit the site here: https://rioguide.batseta.org.za/