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CRISA Code for Responsible Investment in South Africa – do we really need another ESG code?

A “2020 Revision Consultation Draft” aimed at obtaining input into proposals for updating the 2012 Code for Responsible Investment in South Africa (CRISA) was released late last year. The 2012 Code was developed by the Institute of Directors’ Committee on Responsible Investing by Institutional Investors in South Africa and was aligned with the international Principles for Responsible Investment (PRI). CRISA promotes the inclusion of Environment, Social and Governance (ESG) issues into investment decisions. The updates suggested in the consultation draft are derived and aligned with various other approaches and principles. The primary focus is to include all asset classes and types of organisations; embed stewardship and governance more concretely; include implementation and reporting in each principle within a transparency ethos, adopt an outcomes-based approach and “apply and explain”. They aim to have impact, innovation, inclusion and resilience as outcomes of the implementation of the code.


The proposed changes to CRISA show how the thinking around ESG issues has evolved in South Africa. In fact, the original intent of the CRISA Code in 2012 to focus particularly on institutional investors, came out of the deliberations around the evolution of the King codes which set the world standard in terms of good corporate governance. The importance of institutional investors in responsible investing cannot be emphasised enough, given their share of the market.

It is not however just the market share that is important, but also the fact that institutional investors represent many working-class people, through investments made by pension funds, insurers etc.

What CRISA highlights, which is critical to developing countries, is the role of institutional investors in meeting the United Nation’s Sustainable Development Goals (SDGs). With much of the narrative being strongly driven by the climate change imperative, it is essential to recognise that broader sustainability issues also need to be considered, such as job creation, transformation and localisation. The inclusion of the concept of stewardship, which implies a broader purpose to “take care” of something, reinforces this line of thinking. The concept of six capitals and putting value on more than just financial issues, continues this approach.


The draft document makes it clear, that while the code targets the investment industry, it enables a “flexible application on a proportionate basis as the context may require”. This expands the scope to related sectors and players of all sizes in the investment value chain and to foreign investors active in South Africa.  The inclusion of implementation and reporting recommendations gives more detailed and clear guidance to those that apply the code.  Broadening the scope will ensure that investors have a ripple effect and influence adjacent and related market participants.


CRISA refers to the increasing need for good governance, particularly in South Africa given some notable governance failures. The emerging need is for investors to scrutinise investments more closely in South Africa and globally, to manage this significant risk. Given that in some cases, the regulatory oversight of investors is less rigorous, the role of self-regulation and stewardship is doubly important.


Putting the comments on the specifics of revisions to the CRISA code aside,

there is a bigger question around whether the code itself is adding value to the responsible investor in South Africa.

There are two global trends that should be noted with respect to ESG integration and reporting. Firstly, there is a move towards harmonising ESG reporting requirements at a global level to align the various approaches and reduce the reporting burden on business of the plethora of ESG reporting standards, and their differing requirements.  In 2020, the Carbon Disclosure Project, Climate Disclosure Standards Board, Global Reporting Initiative, International Integrated Reporting Council and Sustainability Accounting Standards Board began to collaborate on developing a joint or at least interoperable corporate reporting system in an attempt to begin this journey. In the last quarter, the World Economic Forum’s International Business Council, together with a number of large accounting firms published the “Stakeholder Capitalism Metrics”.  They are also driving simplification and alignment and believe that these metrics will apply regardless of sector, geographic location and economic status.

These are two recent initiatives, but there are many others all calling for a rationalisation of ESG measures whether they be voluntary or legislated. There are obvious areas of differentiation, but

the question is whether sector voluntary reporting or sovereign regulation can accept a global norm and manage only the expected differences at a local or sectoral level.

The benefit is significant to not only companies that have to report or work across a number of different requirements, but also for investors who can then make easy and normalised comparisons between projects and companies.


Secondly, several countries are considering regulating the requirement to integrate and report on ESG issues, a significant shift away from the guidelines and other voluntary approaches that have historically been the norm.  Concerns about “ESG washing” and “ticking the box” rather than real stewardship have been raised and this together with activist shareholders advocating for deeper and more rapid change are driving this trend.


The impact on country competitiveness of integrating and not integrating ESG issues and reporting on them as a regulatory requirement is key. The European Union (EU) is at the forefront of this drive which is understandable, as they led the charge on reducing carbon emissions. A broad range of measures are being considered as outlined in their Action Plan on Financing Sustainable Growth which was released in 2018 and which pivots around the achievements of the SDGs and the Paris Agreement on climate change. Several regulatory proposals have been made under the Action Plan including the ESG Disclosure Regulation and the ESG Taxonomy Regulation which mandates reporting. The proposals also cover all forms of asset managers and financial services players. This trend in the EU is being echoed around the world and in developing and developed countries. New coordinating bodies are emerging such as the International Platform on Sustainable Finance, which has members from developing and developed countries and which aims to “enhance standardisation in regulation related to sustainable finance”, at an intergovernmental level. There are many international collaborations and at national level individual countries are moving ahead. The complexity of managing not only these voluntary frameworks, but now also equally diverse national regulation, is daunting.

Taking all these issues into consideration, the debate that will ensue during the CRISA consultation process to follow, will need to ask some hard questions about the added value of having a South African specific code.

These include whether South Africa should put all its efforts into strengthening international codes, ensuring they converge and normalise and focusing on supporting South African entities in implementation.


The consultation paper states that CRISA must be dynamic and change as the environment in South Africa, and globally, adjust to trends and developments. The paper also however talks to developing “a sustainable organisational model, a process which is currently underway and targeted for conclusion during 2021”.  This eludes to moving CRISA from a code that is intermittently reviewed, to a more formal arrangement with financial and other resource requirements. The market appetite for funding such an arrangement will need to be assessed, but it could also provide hands on support to smaller organisations and spread the systemic uptake of good practice.


Many South African investment organisations are already members of various international bodies such as the Equator Principles and the PRI. The PRI has dozens of large South African organisations as active members, including pension funds, insurers and asset managers. In 2017 the PRI together with the United Nations Environment Programme’s Finance Initiative and the Generation Foundation published a report entitled “The South Africa Roadmap” which highlights South African specific issues. This shows that they are attempting to demonstrate how global principles can be localised and indeed the CRISA principles are very much aligned with those of the PRI. However, smaller organisations may be unable to extract maximum value from global bodies like the PRI and may benefit from a local body. This will need careful consideration in a post Covid-19 world.

The global trend in regulation of ESG reporting may speed up consideration of South African regulation and the future role of CRISA, particularly given South Africa’s vulnerability from a national competitiveness point of view, due to high carbon emissions.  In National Treasury’s paper on Financing a Sustainable Economy, it is concluded that “An action plan is needed to turn this discussion into meaningful actions to enable:

  • Building of capacity across all financial sectors
  • Adopting of voluntary initiatives that include performance measures and monitoring as a precursor to regulation
  • Adopting of a taxonomy that will assist in building credibility and consistency.”

It is clear that South African ESG regulation for institutional and other investors is coming.  How CRISA can play a role in facilitating and smoothing the transition from voluntary to mandatory and its longer- term validity in light of the coming change, needs debate. Parochial interests at various levels will no doubt be at play, requiring leadership that keeps the ultimate goal in mind of reducing negative and maximising positive ESG risks, for the global good and ensuring South Africa is able to attract investment and grow our economy for the benefit of all South Africans.

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