Thursday, November 5, 2009

South Africa JSE signs up for responsible investment

Wednesday, 04 November 2009

South Africa's JSE is one of the first stock exchanges worldwide to become a signatory to the United Nations Principles of Responsible Investment (UN PRI), which guide investors in taking environmental, social and corporate governance issues into account when investing.

The exchange sees the move as a step forward in its already strong support of corporate and investor decision-making, which includes environmental, social and corporate governance factors as well as traditional business issues.

The JSE has for several years worked on ways to prompt businesses and business analysts to increase their focus on environmental, social and governance factors.

"Our listing requirements include elements of the King Code of Corporate Governance, for example," JSE deputy CEO Nicky Newton-King said in a statement this week. "Signing the UN PRI further demonstrates our commitment. It also highlights our role as a pioneer in the sustainability field globally, particularly among stock exchanges.

"We believe that stock exchanges have a role to play in stimulating debate between listed entities and investors about these issues," Newton-King added.

Socially responsible investment index
The JSE has contributed to the cause of responsible investment through developing the Socially Responsible Investment Index (SRI Index), which was launched in 2004 as the first of its kind in an emerging economy.

An index whose constituents are companies who attain required levels in an annual review of their policies, practices and reporting, the SRI Index is becoming a widely accepted gauge for good corporate citizenship for listed entities.

"Responsible investing is coming of age in South Africa, as evidenced the burgeoning support and growing numbers of signatories to the UN PRI," says Newton-King. "In South Africa, there are currently 25 signatories to the principles, a significant number considering the size of our financial sector compared to other developed countries."

Signatories include large asset owners such as the Government Employees Pension Fund and recent signatory the Eskom Pension & Provident Fund.

Guide for investment professionals

Founded in 2005, the UN PRI is a set of principles developed to guide investment professionals to consider environmental, social and corporate governance issues in the selection of investment opportunities and to align investors with broader societal objectives.

In South Africa, apart from greater adoption of the UN PRI, there are other factors raising awareness of responsible investing.

"In South Africa, no business can operate divorced from our past," says Newton-King. "In this respect, issues of sustainability and social responsibility are entrenched, and companies have had to address labour, affirmative action and health-related issues with much more urgency and vigour than elsewhere.

"To add to this, there is no fund manager who can deny the existence of great inequality in South Africa, and we don't need to educate people about the importance of socially responsible investment as much as may be needed in more developed countries."