| Mon 6 Sep 2010, 7:05 | | GEN - General - Draft code for responsible investing released |
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JSE
GEN
GEN - General - Draft code for responsible investing released
Draft Code for Responsible Investing released
The draft Code for Responsible Investing by Institutional Investors in South
Africa has been released for public comment.
The two month comment period, which ends on 31 October this year, was announced
by John Oliphant, chairman of the stakeholder committee that has been drafting
the Code for Responsible Investing by Institutional Investors over the past
five months. Oliphant is also Head: Investments and Actuarial at the Government
Employees Pension Fund (GEPF).
The UK is the only other country with a code for institutional investors.
Oliphant says in 2006 the United Nations introduced the Principles of
Responsible Investing, of which the GEPF is a founding signatory. These
Principles, adopted by a number of South African institutional investors,
encourage investors to integrate environmental, social and governance
(ESG) issues into their investment decision making. The new draft Code,
he explains, is the next step in ensuring that institutional investors
actually implement policies that guide their day to day actions when it
comes to responsible investing.
Together with The King Report on Corporate Governance South Africa (King III),
which is also not legislation but rather principles and practices that are
adhered to on an "apply or explain" basis, the new Code will seek to encourage
best practice conduct by shareholders and companies, says Oliphant.
"Responsible investing and corporate governance guidelines in South Africa
are largely voluntary. The Code aims to put in place the checks and balances
needed to make this voluntary framework successful."
According to Oliphant, anyone who has been expecting a tome of principles
will be left disappointed. Instead, he adds, the new draft Code consists of
simple, yet powerful, voluntary Principles that encourage institutional
investors and their service providers to put in place certain measures
aimed at ensuring responsible investing.
"The Code for Responsible Investing by Institutional Investors in South
Africa consists of four principles. The first two principles encourage
institutional investors to formulate policies that will guide their approach
to being responsible shareholders. And principle three and four require
institutional investors, within the realms of the law, to ensure that the
principles are implemented, upheld and, most importantly, disclosed."
Oliphant says the Code encourages institutional investors and service
providers to adopt the Principles and practice recommendations in the Code
on an "apply or explain" basis.
"If applied and disclosed, these Principles will guide the ultimate
beneficiaries of investments made by institutional investors to ask the right
questions. It will also empower those beneficiaries to select responsible
custodians for their investments. Once the Code is in place, why would a
pension fund place money with an investment manager who has not adopted the
Code and who has not put in place the necessary policies as outlined by the
Code?"
Responsible investing has become a non-negotiable, says Oliphant.
"Institutional investors have a critical role to play in making the overall
corporate governance system effective, because they are in a position to
influence and encourage the voluntary application of sound governance
principles and practices by the companies in which they invest."
He is urging institutional investors and other interested parties to take
the time to consider the draft Code and to come with constructive input.
"This is your chance to add to our framework. Once finalised the beneficiaries
of your investment decisions will expect you to implement this Code and to
disclose the practices you have committed to."
Oliphant reminds institutional investors that it will be their responsibility
to ensure that third party service providers also adhere to the provisions of
this Code and the relevant policies implemented by institutional investors.
The Code in Summary:
Principle 1 - Environmental, Social and Governance (ESG) Policy
The Code requires institutional investors to develop a policy detailing
the process of assessing the investment target`s environmental, social and
governance (ESG) fundamentals. The institutional investor must ensure
that this policy is not only implemented, but also complied with.
Principle 2 - Responsible ownership
The second principle requires institutional investors to demonstrate a
responsible approach to shareholding by implementing a policy detailing
mechanisms of intervention and engagement with companies when concerns
have been identified, as well as the means of escalation if concerns
raised cannot be resolved.
The Code requires such a policy to also detail the approach to voting at
shareholder meetings, including the criteria to be used in reaching voting
decisions, processes for management of conflicts and publication of voting
records.
Controls should also be introduced by the institutional investor to
prevent insider trading as defined by the Security Services Act.
Principle 3 - Promoting the Code through collaboration
The third Principle of the Code encourages institutional investors to
consider a collaborative approach, where appropriate, to promote acceptance
and implementation of the Principles of this Code and other applicable codes
and standards applicable to institutional shareholders.
Principle 4 - Disclosure
Institutional investors are required to fully disclosure to stakeholders
the policies put into place in line with this Code, the implementation of
these policies, and the general application of this Code.
The Code requires an institutional investor to fully and publically disclose
to its stakeholders at least quarterly to what extent the Code has been
applied.
If an institutional investor has not fully applied one of the Principles of
this Code, the reasons should be disclosed honestly. Disclosure should not be
limited to the integrated report only, but also be made accessible via the
institutional investor`s website, quarterly client report and by other
appropriate means of communication to stakeholders.
The draft Code can be downloaded from www.iodsa.co.za or www.asisa.org.za
or www.unpri.org. The deadline for comment is 31 October 2010 and feedback
can be e-mailed to crisacomment@iodsa.co.za.
Note to Editors: The Committee on Responsible Investing by Institutional
Investors in South Africa is composed of the following stakeholders:
Government Employees Pension Fund (GEPF), Association for Savings and
Investment South Africa (ASISA), the Institute of Directors in Southern
Africa (IoDSA), the Public Investment Corporation (PIC), the Johannesburg
Stock Exchange (JSE), Cadiz, Old Mutual, Element Investment Managers,
United Nations Principles for Responsible Investment, Financial Services
Board, Prescient, Radiz Element, Regarding Capital Management, Mergence
Africa, Prudential Portfolio Managers, Investec Asset Management, the
Securities Regulation Panel, and the Principle Officers Association (POA).
Issued on behalf of:
John Oliphant (GEPF)
Chairman of the Committee on Responsible Investing by Institutional
Investors in SA
Sunette Mulder (ASISA)
Deputy Chair of the Committee on Responsible Investing by Institutional
Investors in SA
Date: 06/09/2010 07:05:02 Produced by the JSE SENS Department.
