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“The role of industry bodies in driving positive change”, article in Collective Insight, ASISA, March 2012

Regulation 28, which becomes effective on 1 January 2012, requires pension funds to consider ESG issues when making investment decisions. It is an attempt by Government to ensure that funds invest their money responsibly. They should consider the environment and the social good in where they decide to put their money, and they should have regard for governance considerations in deciding which companies are worthy of their trust. But the cynics amongst us have already labelled this as nothing more than a tick-box exercise. Simply put, a fund could say: “Yes, we have considered ESG issues”. The task is completed and it is business as usual.

Pension funds could be forgiven for this kind of behaviour. No doubt trustees and Principal Officers are very busy people and we all know that change demands extra effort and more time. And as pension funds are separate legal entities, they are perfectly entitled to make their own decisions and operate on their own terms, provided they don’t fall foul of the law. But unlike the law, which changes slowly, lagging behind society as it develops and evolves, the world has changed quickly and remarkably and, as we know too well, things will never be the same again. We live in a global village and we’re all aware of what’s going on in each other’s back yards. Far more importantly, however, we know what is happening to the planet, and that only a concerted effort by everyone who inhabits it will avert us from disaster.

Whether we like it or not, this new environment of easy communication and rapid transfer of knowledge has made it clear that the attitude of “business as usual” simply will not do. We are more accountable to each other than ever before and cannot bury our heads in the sand when we are challenged to re-evaluate the way we do things. If we know we can do better, we have no option but to rise to the occasion. And this is where thought leadership becomes extremely important for pension funds.

As connected as we are today in terms of swift communication technology, it is just as easy for disjointed messages to be spread rapidly along the information highway which sow confusion, fear and misunderstanding. Imagine a scenario where Regulation 28 has been replaced by something more draconian that demands compliance with certain strict requirements in a short space of time. Without a coherent, well thought-through, industry-wide strategy, the task of meeting those requirements could turn into a nightmare for an individual pension fund. Without a space where trustees and Principal Officers can meet in a collegial setting to share ideas and plot their own future, the prospect of negotiating the new world of financial regulations seems bleak indeed.

Pension funds do not only have the law to guide them in how they operate. Over and above Regulation 28 there are also guidelines and principles that industry players have developed in order to help guide their behaviour.

The UN PRI
The United Nations Principles for Responsible Investment is just such an example. But South African signatories to the UN PRI are limited mainly to asset managers, rather than asset owners. Furthermore, the number of asset managers who have subscribed is fairly small. This implies that active engagement with ESG issues in the investment industry is lacking. There is therefore a need to raise awareness of the business case for sustainable investment amongst asset managers.

The CRISA Code
Closer to home we have launched the CRISA Code (Code for Responsible Investing in South Africa) . The Code ensures that institutional investors who have subscribed to it will implement policies to guide their day-to-day actions when it comes to responsible investing. A core principle is that institutional investors incorporate ESG considerations into their investment analyses and activities. Institutional investors are the ones who have to ensure that the overall corporate governance system is effective, including responsible management of environmental and social performance.
The fact that so few asset managers have signed the UN PRI indicates a distinct lack of preparedness for taking responsibility for how money is invested. But can one blame the asset managers of the asset owners themselves are not being vociferous enough about responsible investing?

This is why the Principal Officers Association has teamed up with the International Finance Corporation to drive a project which aims to mainstream ESG issues in the retirement industry. This objective will be achieved through the development of a ready-made framework which pension funds will be able to access to help them place ESG issues squarely on their investment agenda. The aim is to empower pension funds and their boards of management to manage their own futures proactively. Rather than being dictated to by regulators and law makers, pension funds and trustees can influence the future of retirement funds if they embrace the concept of thought leadership and play an active role in plotting the way forward for the financial regulations that will affect them.

The IFC-POA partnership has specific objectives. The first of these is to build capacity amongst POA members and other investment practitioners in South Africa so that integration of ESG principles is an achievable reality. The next is to develop learning tools and cast studies to provide for more effective ESG investment practices. The third objective is to monitor the integration of ESG practices in mainstream investment policies within the retirement industry.
The development of tools and templates will serve both as a measure and an enabler of sustainable investment structures, policies, procedures and reporting. The utilisation of the tools would assist retirement funds with the implementation of regulatory imperatives, the assessment of implementation progress, as well as continuous monitoring and reporting on the sustainable investment framework. The tools would typically consist of a basket of standardised guidelines, contracts, service level agreements, and reporting formats.

The project will be structured over four phases, with each phase informing the next one. Phases will overlap. The duration of the project is 24 months and will end in April 2012.

Phase I

Analysis of current (non-ESG) retirement industry investment practices in South Africa

Phase II

Identification of material ESG issues for the retirement industry in South Africa and appropriate private sector responses, including risk mitigation and new business models, which could represent profitable investment opportunities for pension funds.

Phase III

Analysis of international experience and recommendations on where, why and how ESG considerations could be injected into SA pension fund practices

Phase IV

Tools and templates to assist pension funds to implement/integrate ESG into their processes, procedures and contracts with relevant stakeholders in the investment supply chain

The POA sees this initiative as an industry wide one. Therefore a Steering Committee will oversee the strategic direction of the project. The Committee comprises representatives from the following organisations:

Association for Savings and Investment for South Africa (ASISA)
Banking Association of South Africa (BASA)
Financial Planning Institute (FPI)
Institute of Retirement Funds (IRF)
Institute of Directors for South Africa (IoDSA)
Pension Lawyers Association (PLA)
South African Institute of Chartered Accountants (SAICA)
Government Employees Pension Fund (GEPF)
Union Federations
Department of National Treasury, (NT)
Financial Services Board (FSB)
UN PRI
Botswana Public Officers Pension Fund (BPOPF)
Debswana Pension Fund
Government Institutions Pensions Fund, Namibia (GIPF)

The ultimate aim of the partnership is to obtain large-scale buy-in from the retirement industry. The principles-based approach is key because principles cannot be outsourced. It is important for asset owners themselves to become empowered so that they are able to give clear instructions and properly defined mandates to their asset managers. This is an industry-wide initiative and, as such, the inputs from all stakeholders are valuable and will be consulted on.

Sustainable Returns article in Public Investors, Public Investment Corporation (PIC) quarterly magazine, July 2012

The majority of Southern African retirement funds will soon be well equipped to
integrate environmental, social and corporate governance (ESG) sustainability factors
into their investment decisions and ownership activities within the next two years.

The training programmes and practical tools needed to help Principal Executive
Officers and Trustees of retirement funds comply with new requirements of the
revised Regulation 28 of the Pension Funds Act and the Code for Responsible
Investing in South Africa (CRISA) are currently being developed by the
Sustainable Returns for Pensions and Society Project.

Wanjiru Kirima, chairperson of the Sustainable Returns Steering Committee, says
the new Regulation 28 and CRISA, both introduced last year, have expanded the
fiduciary duty of retirement fund Trustees significantly. This, she adds, requires a
whole new set of competencies to help Trustees properly implement ESG

considerations.

To help Trustees and Principal Executive Officers achieve these competencies,
the southern Africa retirement industry launched the Sustainable Returns Project,
which Kirima describes as a collaborative effort to implement a world-class system
by learning from each other and evolving together.

Initiated by the Principal Officers Association (POA), the project includes a
pioneering partnership with IFC (International Finance Corporation), a member of the
World Bank Group. The project is supported by the Association for Savings and
Investment South Africa (ASISA), the Government Employees Pension Fund (GEPF),
National Treasury, the Financial Services Board (FSB), Institute of Retirement Funds
(IRF), trade unions and a number of other key stakeholders. The Project Management
Committee (POA, IFC, ASISA & GEPF) oversees the daily operations and tracks and
monitors the project’s development.

The project highlights for
Trustees the importance of integrating ESG issues into
investment decisions and helps them understand both the risks and opportunities
these issues pose over the long term to the value of the investment portfolios
entrusted to them. Once Trustees appreciate this, the project will provide them with
the tools needed to develop investment mandates that guide asset managers in
applying responsible and sustainable investment practices. Key ingredients will be the
policies funds develop to explain their approach to ESG and the questions asset
managers will need to answer in their regular reporting to funds.

This project will ultimately empower institutional money to meet financial
commitments to members and future members through a deeper appreciation of the
relationship to positive environmental, social and governance performance of
investee businesses.

Kirima says only once all retirement funds, as the biggest asset owners, fully

appreciate the importance of responsible investing can an initiative like CRISA truly
come into effect.
Investment managers are bound by the investment mandates given to them by
asset owners like retirement funds. Only once these mandates change to include ESG
issues, can investment managers fully begin to implement CRISA.

“Currently we have a situation whereby our big retirement funds like the GEPF
and EPPF have put in place systems that enable them to successfully integrate ESG
requirements into their investment mandates and to then monitor the implementation
and measure the outcomes. But the same is not true for many of the other
retirement funds.”

Kirima says rather than wait for each and every retirement fund to reinvent the
wheel and to come up with their own systems, the Sustainable Returns project, which
has industry wide representation, will draw on local and international best practice to
develop a common ESG toolkit
for Southern African retirement funds to help with
implementation.

“IFC is our technical partner. As the largest multilateral source of loans and
equity finance for private enterprises in emerging markets, IFC is also a leader in
applying ESG standards to investments. With help from local and international
experts, IFC is supporting us to develop world-class tools relevant to Southern Africa.
At the same time the large retirement funds represented on our steering committee
are sharing with this project their experiences and systems currently being applied by
their Principal Executive Officers and Trustees when considering ESG issues. National
Treasury and the FSB are guiding this project to ensure the tools and training are
achieving the regulatory goals.”

The two-year project consists of four phases, which will cover among other
aspects the analysis of current investment practices within the retirement and
pension fund industry in
Southern Africa as well as the development and introduction
of tools, templates and training. There is constant engagement with asset owners,
asset consultants, and asset managers through the Top 100 pension funds in South
Africa to keep them abreast of developments.

In May this year, the Sustainable Returns Project held a breakfast seminar,
supported by the FSB and National Treasury for the Top 100 Pension Funds. It was a
well-attended seminar with a clear message from Olano Makhubela, Chief Director of
Financial Investments and Savings, who stated:
“The National Treasury welcomes this much needed initiative and its inclusiveness,
and greatly appreciates the involvement of all the stakeholders in this project. This
welcome industry-led initiative follows the promulgation of the new Regulation 28 last
year and seeks to give practical effect to one of the key principles in the Regulation,
namely the need for pension funds Trustees to take
into consideration the role of the
Environment, Society and Governance when they consider their investments.”

The PIC and its main client, the Government Employees Pension Fund (GEPF),
were early adopters of a responsible investment approach by committing to the UN-
backed Principles for Responsible Investment (UNPri). The PIC’s active engagement
with investee companies on ESG issues has resulted in many companies better
incorporating environmental, social and governance (ESG) factors across their
operations in recent years. The PIC, as the country’s largest asset manager,
continues to provide a strong voice on these issues in South Africa and is expected to
continue to flex its investment muscle as it seeks suitable investments for its clients
on the African continent and further afield when investing in other international
markets. The collaborative asset owner-asset manager approach to
ESG as exhibited
by the GEPF and PIC can only result in improved long term sustainable returns for the
more than a million public servants dependent on the GEPF and PIC for their
retirement savings.

Sustainable Returns article in IRFINITY Magazine, Institute for Retirement Funds (IRF), June 2012

he majority of Southern African retirement funds will soon be well equipped to integrate environmental, social and corporate governance (ESG) sustainability factors into their investment decisions and ownership activities within the next two years.

The training programmes and practical tools needed to help principal officers and trustees of retirement funds comply with new requirements of the revised Regulation 28 of the Pension Funds Act and the Code for Responsible Investing in South Africa (CRISA) are currently being developed by the Sustainable Returns for Pensions and Society Project.

Wanjiru Kirima, chairperson of the Sustainable Returns Steering Committee, says the new Regulation 28 and CRISA, both introduced last year, have expanded the fiduciary duty of retirement fund trustees significantly. This, she adds, requires a whole new set of competencies to help trustees properly implement ESG considerations.

To help trustees and principal officers achieve these competencies, the southern Africa retirement industry launched the Sustainable Returns Project, which Kirima describes as a collaborative effort to implement a world-class system by learning from each other and evolving together.

Initiated by the POA, the project includes a pioneering partnership with IFC (International Finance Corporation), a member of the World Bank Group. The project is supported by the Association for Savings and Investment South Africa (ASISA), the Government Employees Pension Fund (GEPF), National Treasury, the Financial Services Board (FSB), Institute of Retirement Funds (IRF), trade unions and a number of other key stakeholders. The Project Management Committee (POA, IFC, ASISA & GEPF) oversees the daily operations and tracks and monitors the project’s development.

The project highlights for trustees the importance of integrating ESG issues into investment decisions and helps them understand both the risks and opportunities these issues pose over the long term to the value of the investment portfolios entrusted to them. Once trustees appreciate this, the project will provide them with the tools needed to develop investment mandates that guide asset managers in applying responsible and sustainable investment practices. Key ingredients will be the policies funds develop to explain their approach to ESG and the questions asset managers will need to answer in their regular reporting to funds.

This project will ultimately empower institutional money to meet financial commitments to members and future members through a deeper appreciation of the relationship to positive environmental, social and governance performance of investee businesses.

Kirima says only once all retirement funds, as the biggest asset owners, fully appreciate the importance of responsible investing can an initiative like CRISA truly come into effect.
Investment managers are bound by the investment mandates given to them by asset owners like retirement funds. Only once these mandates change to include ESG issues, can investment managers fully begin to implement CRISA.

“Currently we have a situation whereby our big retirement funds like the GEPF and EPPF have put in place systems that enable them to successfully integrate ESG requirements into their investment mandates and to then monitor the implementation and measure the outcomes. But the same is not true for many of the other retirement funds.”

Kirima says rather than wait for each and every retirement fund to reinvent the wheel and to come up with their own systems, the Sustainable Returns project, which has industry wide representation, will draw on local and international best practice to develop a common ESG toolkit for Southern African retirement funds to help with implementation.

“IFC is our technical partner. As the largest multilateral source of loans and equity finance for private enterprises in emerging markets, IFC is also a leader in applying ESG standards to investments. With help from local and international experts, IFC is supporting us to develop world-class tools relevant to Southern Africa. At the same time the large retirement funds represented on our steering committee are sharing with this project their experiences and systems currently being applied by their principal officers and trustees when considering ESG issues. National Treasury and the FSB are guiding this project to ensure the tools and training are achieving the regulatory goals.”

The two-year project consists of four phases, which will cover among other aspects the analysis of current investment practices within the retirement and pension fund industry in Southern Africa as well as the development and introduction of tools, templates and training. There is constant engagement with asset owners, asset consultants, and asset managers through the Top 100 pension funds in South Africa to keep them abreast of developments.

In May this year, the Sustainable Returns Project held a breakfast seminar, supported by the FSB and National Treasury for the Top 100 Pension Funds. It was a well-attended seminar with a clear message from Olano Makhubela, Chief Director of Financial Investments and Savings, who stated:

“The National Treasury welcomes this much needed initiative and its inclusiveness, and greatly appreciates the involvement of all the stakeholders in this project. This welcome industry-led initiative follows the promulgation of the new Regulation 28 last year and seeks to give practical effect to one of the key principles in the Regulation, namely the need for pension funds trustees to take into consideration the role of the Environment, Society and Governance when they consider their investments.”

Southern African Pension Funds Tackle Responsible Investing

The majority of southern African retirement funds will soon be well equipped to integrate environmental, social and corporate governance (ESG) factors into their investment decisions and ownership activities. An industry-led initiative, Sustainable Returns for Pensions and Society, responds to new regulations and aligns with efforts by the Johannesburg Stock Exchange (JSE).

In South Africa the pension fund industry is significant in terms of scale as well as the impact it has on the livelihoods of working South Africans. Long term investors, serving the interests of these ultimate beneficiaries, need to ensure they can deliver sustainable returns. This means anticipating the impacts of future trends such as climate change, water scarcity, food security and energy challenges. It also requires strong and sustainable local businesses.

The new Regulation 28 of the Pension Funds Act in South Africa contains prudential guidelines for retirement fund investments. It places in the mainstream the importance of managing risks and opportunities related to the ESG performance of investments across all asset classes. Retirement funds’ investment policy statements must now indicate how they intend to apply and deal with ESG criteria and disclosures.

South Africa is among the first countries worldwide to issue integrated reporting requirements and the JSE is playing a multifaceted role, aiming to exert influence and provide thought leadership to achieve corporate behaviour change.

The new regulation is reinforced by a number of national and international policy initiatives, including the South African National Growth Path Plan, the King Code of Governance Principles for South Africa (King III), the United Nations backed Principles for Responsible Investment (PRI) and a new Code for Responsible Investing in South Africa (CRISA).

CRISA serves as a framework for institutional investors to incorporate ESG in their policies and investment decisions, including engagement and proxy voting. Wanjiru Kirima, chairperson of the Sustainable Returns Steering Committee, says the new Regulation 28 and CRISA, both introduced last year, have expanded the fiduciary duty of retirement fund trustees significantly. This, she adds, requires a whole new set of competencies to help trustees properly implement ESG considerations.

To help trustees and principal officers achieve these competencies, the southern African retirement industry launched the Sustainable Returns Project in October 2011, which Kirima describes as a collaborative effort to implement a world-class system by learning from each other and evolving together.

An industry-led approach to responsible investing

Supported by funding from the Norwegian Government, the Sustainable Returns project was convened by the Principal Officers Association of South Africa (POA), the International Finance Corporation (IFC), the Government Employees Pension Fund of South Africa (GEPF), and the Association for Savings and Investment South Africa (ASISA).

It is led by a Steering Committee comprising the Financial Services Board (FSB), National Treasury of South Africa, Banking Association of South Africa (BASA), Botswana Public Officers Pension Fund, Congress of South African Trade Unions (COSATU), Debswana Pension Fund, Federation of Unions of South Africa (FEDUSA), Financial Planning Institute (FPI), Government Institutions Pension Fund Namibia (GIPF), Institute of Directors (IoD), Institute of Retirement funds (IRF), National Council of Trade Unions (NACTU), Pension Lawyers Association, South African Institute of Chartered Accountants (SAICA), Southern Africa Venture Capital Association (SAVCA), Telkom Pension Fund, and the Principles for Responsible Investment (PRI).

In May this year, the Sustainable Returns Project held a breakfast seminar at the JSE, supported by the FSB and National Treasury for the Top 100 Pension Funds. It was a well-attended seminar with a clear message from Olano Makhubela, Chief Director of Financial Investments and Savings, who stated:

“The National Treasury welcomes this much needed initiative and its inclusiveness, and greatly appreciates the involvement of all the stakeholders in this project. This welcome industry-led initiative follows the promulgation of the new Regulation 28 last year and seeks to give practical effect to one of the key principles in the Regulation, namely the need for pension funds trustees to take into consideration the role of the Environment, Society and Governance when they consider their investments.”

The role of industry bodies in driving positive change

Regulation 28, which becomes effective on 1 January 2012, requires pension funds to consider ESG issues when making investment decisions. It is an attempt by Government to ensure that funds invest their money responsibly. They should consider the environment and the social good in where they decide to put their money, and they should have regard for governance considerations in deciding which companies are worthy of their trust. But the cynics amongst us have already labelled this as nothing more than a tick-box exercise. Simply put, a fund could say: “Yes, we have considered ESG issues”. The task is completed and it is business as usual.

Pension funds could be forgiven for this kind of behaviour. No doubt trustees and Principal Officers are very busy people and we all know that change demands extra effort and more time. And as pension funds are separate legal entities, they are perfectly entitled to make their own decisions and operate on their own terms, provided they don’t fall foul of the law. But unlike the law, which changes slowly, lagging behind society as it develops and evolves, the world has changed quickly and remarkably and, as we know too well, things will never be the same again. We live in a global village and we’re all aware of what’s going on in each other’s back yards. Far more importantly, however, we know what is happening to the planet, and that only a concerted effort by everyone who inhabits it will avert us from disaster.

Whether we like it or not, this new environment of easy communication and rapid transfer of knowledge has made it clear that the attitude of “business as usual” simply will not do. We are more accountable to each other than ever before and cannot bury our heads in the sand when we are challenged to re-evaluate the way we do things. If we know we can do better, we have no option but to rise to the occasion. And this is where thought leadership becomes extremely important for pension funds.

As connected as we are today in terms of swift communication technology, it is just as easy for disjointed messages to be spread rapidly along the information highway which sow confusion, fear and misunderstanding. Imagine a scenario where Regulation 28 has been replaced by something more draconian that demands compliance with certain strict requirements in a short space of time. Without a coherent, well thought-through, industry-wide strategy, the task of meeting those requirements could turn into a nightmare for an individual pension fund. Without a space where trustees and Principal Officers can meet in a collegial setting to share ideas and plot their own future, the prospect of negotiating the new world of financial regulations seems bleak indeed.

Pension funds do not only have the law to guide them in how they operate. Over and above Regulation 28 there are also guidelines and principles that industry players have developed in order to help guide their behaviour.

The UN PRI
The United Nations Principles for Responsible Investment is just such an example. But South African signatories to the UN PRI are limited mainly to asset managers, rather than asset owners. Furthermore, the number of asset managers who have subscribed is fairly small. This implies that active engagement with ESG issues in the investment industry is lacking. There is therefore a need to raise awareness of the business case for sustainable investment amongst asset managers.

The CRISA Code
Closer to home we have launched the CRISA Code (Code for Responsible Investing in South Africa) . The Code ensures that institutional investors who have subscribed to it will implement policies to guide their day-to-day actions when it comes to responsible investing. A core principle is that institutional investors incorporate ESG considerations into their investment analyses and activities. Institutional investors are the ones who have to ensure that the overall corporate governance system is effective, including responsible management of environmental and social performance.
The fact that so few asset managers have signed the UN PRI indicates a distinct lack of preparedness for taking responsibility for how money is invested. But can one blame the asset managers of the asset owners themselves are not being vociferous enough about responsible investing?

This is why the Principal Officers Association has teamed up with the International Finance Corporation to drive a project which aims to mainstream ESG issues in the retirement industry. This objective will be achieved through the development of a ready-made framework which pension funds will be able to access to help them place ESG issues squarely on their investment agenda. The aim is to empower pension funds and their boards of management to manage their own futures proactively. Rather than being dictated to by regulators and law makers, pension funds and trustees can influence the future of retirement funds if they embrace the concept of thought leadership and play an active role in plotting the way forward for the financial regulations that will affect them.

The IFC-POA partnership has specific objectives. The first of these is to build capacity amongst POA members and other investment practitioners in South Africa so that integration of ESG principles is an achievable reality. The next is to develop learning tools and cast studies to provide for more effective ESG investment practices. The third objective is to monitor the integration of ESG practices in mainstream investment policies within the retirement industry.
The development of tools and templates will serve both as a measure and an enabler of sustainable investment structures, policies, procedures and reporting. The utilisation of the tools would assist retirement funds with the implementation of regulatory imperatives, the assessment of implementation progress, as well as continuous monitoring and reporting on the sustainable investment framework. The tools would typically consist of a basket of standardised guidelines, contracts, service level agreements, and reporting formats.

The project will be structured over four phases, with each phase informing the next one. Phases will overlap. The duration of the project is 24 months and will end in April 2012.

Phase I

Analysis of current (non-ESG) retirement industry investment practices in South Africa

Phase II

Identification of material ESG issues for the retirement industry in South Africa and appropriate private sector responses, including risk mitigation and new business models, which could represent profitable investment opportunities for pension funds.

Phase III

Analysis of international experience and recommendations on where, why and how ESG considerations could be injected into SA pension fund practices

Phase IV

Tools and templates to assist pension funds to implement/integrate ESG into their processes, procedures and contracts with relevant stakeholders in the investment supply chain

The POA sees this initiative as an industry wide one. Therefore a Steering Committee will oversee the strategic direction of the project. The Committee comprises representatives from the following organisations:

Association for Savings and Investment for South Africa (ASISA)
Banking Association of South Africa (BASA)
Financial Planning Institute (FPI)
Institute of Retirement Funds (IRF)
Institute of Directors for South Africa (IoDSA)
Pension Lawyers Association (PLA)
South African Institute of Chartered Accountants (SAICA)
Government Employees Pension Fund (GEPF)
Union Federations
Department of National Treasury, (NT)
Financial Services Board (FSB)
UN PRI
Botswana Public Officers Pension Fund (BPOPF)
Debswana Pension Fund
Government Institutions Pensions Fund, Namibia (GIPF)

The ultimate aim of the partnership is to obtain large-scale buy-in from the retirement industry. The principles-based approach is key because principles cannot be outsourced. It is important for asset owners themselves to become empowered so that they are able to give clear instructions and properly defined mandates to their asset managers. This is an industry-wide initiative and, as such, the inputs from all stakeholders are valuable and will be consulted on.

Initial Press Release: Founding Principles

On 30 November 2011 – IFC, a member of the World Bank Group, signed an agreement with the Principal Officers Association of South Africa to work on the integration of environmental, social, and corporate governance issues in investment decisions. POA is a trade association of pension fund managers representing more than ZAR 2 trillion (about $250 billion) in assets under management.

The project will provide a consistent framework and set of tools for retirement funds to comply with the new Regulation 28 of South Africa’s Pension Funds Act. The regulation is pioneering on a global level in that it requires pension funds to actively consider sustainability issues in their investment decisions. This is reinforced by a number of national and international policy initiatives such as the Code for Responsible Investing in South Africa (CRISA) and the UN-backed Principles for Responsible Investment.

“Improving the environmental, social, and governance performance of businesses contributes to their financial resilience and profitability. Institutional investors have a key role to play in catalyzing innovation and investment, especially when it comes to climate change,” said Wanjiru Kirima, Chairperson of the Principal Officers Association and also the Chairperson of the project steering committee. “This project is an innovative and practical step for the industry to help address the challenges that South Africa is facing while improving returns for pensions and society.”

The project will draw on local and international best practice, including IFC’s Sustainability Framework for private sector investment in emerging markets. The Sustainability Framework reflects IFC’s strategic approach to climate change and the integration of environmental and social sustainability. The broad adoption of these practices can transform markets and improve people’s lives.

“IFC invests in priority sectors such as renewable energy, infrastructure, agribusiness and small and medium enterprises based on our sustainability framework. By working with other institutional investors we seek to leverage additional long-term and sustainable investment into such sectors,” said Saleem Karimjee, IFC Southern Africa Country Manger. “Incorporating environmental, social, and corporate governance practices can help to protect investment portfolios, especially in the light of increasing risks from climate change.”

More than a dozen institutions, including the National Treasury of South Africa, the South African Government Employees Pension Fund, Financial Services Board and the Association for Savings and Investment South Africa, will lead this initiative. These institutions comprise the steering committee of the project and have responsibilities for retirement fund investment practices in South Africa, Botswana and Namibia.

This project is supported by funding from the Norwegian Government.

About this Project

Sustainable Returns for Pensions and Society is an industry-led initiative to integrate environmental, social, and corporate governance considerations into the mainstream of retirement industry investment practices in Southern Africa. Convened by the Principal Officers Association of South Africa (POA), IFC, the Government Employees Pension Fund (GEPF), and the Association for Savings and Investment South Africa (ASISA), the project Steering Committee includes high-level representatives of the Financial Services Board (FSB), National Treasury of South Africa, Banking Association of South Africa (BASA), Botswana Public Officers Pension Fund, Congress of South African Trade Unions (COSATU), Debswana Pension Fund, Federation of Unions of South Africa (FEDUSA), Financial Planning Institute (FPI), Government Institutions Pension Fund Namibia (GIPF), Institute of Directors (IoD), Institute of Retirement funds (IRF); National Council of Trade Unions (NACTU), Pension Lawyers Association, South African Institute of Chartered Accountants (SAICA), Southern Africa Venture Capital Association (SAVCA), Telkom Pension Fund, and the UN Principles for Responsible Investment (PRI). For more information, please visit www.gepf.gov.za and www.asisa.co.za.

About the Principal Officers Association

The Principal Officers Association (POA) is a non-profit organization, and the only one of its kind in South Africa, that aims to promote the common interests of Principal Officers of retirement funds. The POA’s membership of 425 Principal Officers and associate members represent more than 6.2 million retirement fund members in South Africa. The POA also has members in Southern Africa Development Community (SADC). The principles espoused by CRISA are endorsed by the POA. For more information, visit www.poa.org.za.

About IFC

IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, providing advisory services to businesses and governments, and mobilizing capital in the international financial markets. In fiscal 2011, amid economic uncertainty across the globe, we helped our clients create jobs, strengthen environmental performance, and contribute to their local communities—all while driving our investments to an all-time high of nearly $19 billion. For more information, visit www.ifc.org.

Sustainable Returns – Industry Engagement Process

The Sustainable Returns Project completed a comprehensive engagement with industry stakeholders between October 2012 and end of January 2013 to collect input on a new practical guide to responsible investment and ownership for Southern African pension funds.

The consultation engaged Trustees and Principal Executive Officers from the top 100 pension funds in South Africa and included special focus meetings with asset consultants and asset managers in November 2012. Sustainable Returns and National Treasury hosted a joint workshop for asset owners at the Johannesburg Stock Exchange on 23 January 2013.

The project also engaged the following institutions directly and benefited from valuable input: National Treasury, Financial Services Board, Pension Lawyers Association (PLA), Nedlac Labour Constituency Retirement Funds, The Congress of South African Trade Unions (COSATU), Committee of the Code for Responsible Investing in South Africa (CRISA), Greater Good, City of Johannesburg, UNPRI, ASISA Responsible Investment Committee, Insurance Sector Education and Training Authority (INSETA), and the South African Institute of Chartered Accountants (SAICA).