Taking hands to guide, inform, share
Globally, companies are ever more aware of the need to consider broader impacts, risks and opportunities in relation to their business activities, in keeping with the imperative that companies should balance the need to generate returns for shareholders with their wider obligations to the environment and society as a whole.
Similarly, investors have increasingly been considering how to incorporate broader considerations into corporate valuation and the concomitant investment decision-making process.
As a platform for businesses to raise capital and provide an avenue for the creation of tradable products, the exchange has recognised that a purely reactive response to sustainability may render its own viability in jeopardy without businesses to list. Therefore, as a service provider to both investors and issuers, the JSE has for long leveraged its central role in the economy beyond simply expressing a view on why sustainability is important, driving adherence through multiple streams.
Setting a strong enabling framework
Governance failures at corporate or government level have been shown to affect systemic stability and contribute to market volatility, also potentially impacting the efficiency and growth of the local economy.
The JSE Listing Requirements has a long history of being at the forefront of promoting strong governance and disclosure by companies listing on the JSE. Beyond having very specific governance requirements that companies must comply with (such as the separation of CEO and Chairman), companies have to report on the extent to which they comply with the principles of the King Code on Corporate Governance (“King”) on an apply or explain basis.
In South Africa, King has been urging companies to commit to the principles of the triple bottom line since King II in 2002. From 2010, King III promoted the concept that strategy, governance and sustainability are inextricably intertwined, and recommended that companies integrate their approach to and reporting on risks and opportunities across financial and sustainability considerations. The incorporation of King into the Listing Requirements made the JSEthe first exchange globally to mandate companies to move towards integrated reporting or explain why they are not doing so.
Issuer and Investor Engagement
Learning and sharing
Engagement by investors with corporates regarding sustainability issues is not yet prevalent. The JSE’s consultations have found that the investment industry grapples with integrating environmental, social and governance (ESG) considerations into valuation and analysis of companies to present a more comprehensive picture of the company’s ability to achieve and sustain long term value creation.
To contribute to fostering an environment where sustainability is part of investment analysis, the JSE has a number of initiatives in place:
- The JSE actively participates in the global sustainability debate through the UNPRI and the Sustainable Stock Exchanges initiative.
- An annual SRI Showcase / ESG Investor Briefing has been run since 2011
In 2015, the JSE introduced topical seminars aimed at oscillating challenging sustainability issues for companies to discuss and work through with subject matter experts and piers;Keynote presentation on Marikana by John Brand, Bowman Gilfillan, 18 November 2015.
Recognising strides in sustainable business
The JSE announced on 3 June 2015 that it is partnering with FTSE Russell in evolving its work on promoting ESG disclosure by listed companies (see the announcement here ). This new offering will replace the pioneering Socially Responsible Investment (SRI) Index, which has been the JSE’s flagship sustainability product, since 2004. The new offering will build on the achievements of the SRI Index and the strides of corporates, while enabling expanded opportunities for investors to integrated ESG into investments.
Black Economic Empowerment
As part of its efforts to promote the achievement of an equitable landscape, the JSE has a number of initiatives in place:
- Measuring black ownership of the market
Research conducted on behalf of the JSEgives South Africa a basis from which black ownership can be measured in future.
- BEE Share Scheme Trading
Beyond these, the JSE has for many years run a number of initiatives to foster improved financial literacy and encourage retail South Africans investors to invest on the exchange. More information about these initiatives can be found under Community in the Managing our Footprint page.