International Frameworks
and Initiatives
The mainstreaming of RI has been accompanied by increasingly successful efforts to standardise and institutionalise RI at the international level.
However, this has resulted in a plethora of investor initiatives and frameworks that address RI and ESG.
This section outlines some of the key international frameworks and initiatives that South African asset owners should be aware of.
The mainstreaming of RI has been accompanied by increasingly successful efforts to standardise and institutionalise RI at the international level.
However, this has resulted in a plethora of investor initiatives and frameworks that address RI and ESG.
This section outlines some of the key international frameworks and initiatives that South African asset owners should be aware of.
One of the most important international initiatives is the Principles for Responsible Investment (PRI), which launched in 2006.
The PRI supports an international network of asset owners, asset managers and other service providers, which commit to the PRI’s six principles, to incorporate ESG factors into their investment and stewardship decisions. Several South African asset owners and asset managers are signatories to the PRI.
The Sustainable Development Goals (SDGs) were adopted by all United Nations Member States in 2015 as a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030.
The 17 SDGs are integrated — meaning, they recognize that action in one area will affect outcomes in others, and that development must balance social, economic, and environmental sustainability.
There are several funds that use the SDGs as the lens that informs investment decisions.
The goals are also a good fit with thematic investing which organises stock selection in accordance with selected themes such as clean energy, healthcare, and education.
The ISSB, which was established by the IFRS Foundation to develop a comprehensive global baseline for sustainability disclosures for capital markets, issued its inaugural global sustainability disclosure standards in June 2023.
IFRS S1 addresses sustainability-related disclosure, while IFRS S2 presents specific climate-related disclosures.
The ISSB Standards enable companies to provide sustainability-related disclosure alongside their financial statements.
Companies that apply IFRS S1 and IFRS S2 will meet the requirements of the Task Force on Climate-related Financial Disclosures, which were first published in 2018 to increase understanding of the financial risks related to climate change, as these have been integrated into the ISSB’s Standards.
In July 2023, following the publication of the ISSB Standards, it was announced that the TCFD had fulfilled its remit and disbanded with the IFRS Foundation assuming responsibility for monitoring the progress of companies’ climate-related disclosures.
The TCFD Recommendations and the ISSB Standards address four areas:
- Governance: Disclose the organisation’s governance processes and procedures around climate-related risks and opportunities.
- Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning where such information is material.
- Risk Management: Disclose how the organisation identifies, assesses, prioritises and manages climate-related risks.
- Metrics and Targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
The IFC’s Performance Standards on Environmental and Social Sustainability have become a global benchmark for environmental and social risk management.
They are used by over 100 financial institutions worldwide, and are designed to help avoid, mitigate, and manage risks and impacts to encourage sustainable business practices.
IFC is a global standard setter for sustainable investments in emerging markets and its responsible investment practices, guidance resources, and experience can provide valuable information for South African pension funds and their service providers.