South Africa has a highly fragmented pension fund sector. This causes pension schemes to be comparatively small on average and to suffer from the governance and capacity constraints that many small schemes in other markets face.  

However, this does not prevent the implementation of responsible investment strategies. Smaller schemes will need to look carefully at priorities, ensure that their service providers offer ESG-aligned products, and may also want to consider collaborative engagement as one of their strategies. 

It is important to ensure that asset managers have ESG capabilities and are aligned with the fund’s investment beliefs. This can be achieved by including ESG requirements in contractual agreements with managers.  

Collaboration with other investors can help small funds implement responsible investment activities, such as engaging investee companies to improve their behaviour. This is because collaboration reduces costs and man-hours while increasing the ability to influence investee companies. 

A PRI report, Implementation of the PRI by small and resource constrained investors (2011) presented case studies that demonstrate how small and resource-constrained asset owner and investment manager signatories are implementing the Principles for Responsible Investment. Although dated, the report still provides some valuable insight.