South African investors embrace ESG

A group of South African investors, led by the country’s largest pension fund, the R711.15 billion (US$89 billion) Government Employees Pension Fund, have launched an investor network as part of their commitment to the United Nations Principles of Responsible Investment (UNPRI). Amanda White examines the ambitions of the network in changing the investment landscape in that country.

The Government Employees Pension Fund (GEPF), together with a group of other investors and service providers worth a combined R1,625 billion (US$203 billion), have formed an investor network in South Africa aimed at raising awareness of environmental, social and corporate governance (ESG) investment risks and to encourage pension funds and other asset owners to include these factors in their investment decisions.

The network, which is only the third country-based network in the world behind Brazil and South Korea, forms part of the investors’ commitment to the UNPRI.

Led by the GEPF, the South African PRI Network is supported by the PRI secretariat and Noah Chair for responsible investment at the University of South Africa, whose vision is a “South Africa where all investment is said to be responsible investment”.

Working collaboratively, the network aims to capture evolving best practice on how to factor ESG risks into investments processes and to implement the principles in the South African context, and may involve collective engagement.

One of the challenges facing the UNPRI signatories has been how to implement them, and in particular where country-specific barriers, such as regulation, may prove to be an obstacle.

Executive director of the PRI, James Gifford, says while responsible investment is a global movement it needs to be applied to local conditions and focus on issues that are relevant to local investors.

“I am delighted that PRI signatories in South Africa have taken the initiative to create this network. This network is a significant step forward in the mainstreaming of responsible investment practices across the globe,” he says.

As well as promoting that ESG issues be considered in investment practice, the South African network will specifically examine barriers that might prevent an increase in the ability of South African investors to engage with companies to improve corporate performance on ESG matters. This will include the network members discussing the potential for future collaborative engagements by investors.

According to the head of investments and actuarial at GEPF, John Oliphant, the network is committed to helping build South African capital markets that are sustainable over the long term.

“The new network has come together to help investors put the UNPRI into practice here in South Africa. As investors we recognise that ESG issues such as transformation, human rights and climate change can have a financial impact on our investments if they are not successfully managed.

“No financial institution can do this alone, and this network will help responsible investors in South Africa to combine our knowledge, influence and reach wherever possible. It’s a potential landmark moment for responsible investment in South Africa.”

In addition to GEPF, which has about 50 per cent of its assets in domestic equities, the other PRI South Africa network participants are 27four Investment Managers, Advantage Asset Managers (Pty) Limited, Frater Asset Management, Futuregrowth Asset Management, Hermes Equity Ownership Services, Investec, Kagiso Asset Management, Prescient Investment Management, Prudential Portfolio Managers, RisCura, and Sanlam Investment Management.