The JSE has a role to play in creating an enabling environment for more sustainable practices, particularly in terms of South Africa’s transition to using renewable energies, JSE chief sustainability officer Shameela Soobramoney stated at the Southern Africa-Europe CEO Dialogue event hosted in Johannesburg in November.
“Given the role that capital markets play in South Africa, coupled with the need for private-sector involvement, it’s obvious how important these are in encouraging more sustainable energy practices. Our socioeconomic issues and inequalities are as important as the environmental challenges that we face, as they are also inextricably linked. There are huge opportunities for a country willing to transition to renewable-energy production in a way that leaves nobody behind,” she explained.
Soobramoney commented that the world was operating on a budget deficit of between $2-trillion and $3-trillion a year to achieve the United Nations Sustainable Development Goals by 2030.
She contended that through an enabling environment created by the JSE, achieving these and the required energy transition could be conducted in a manner that would help South Africa deal with other socioeconomic and development challenges.
The JSE has been active in encouraging sustainability in the local market since 2004, when it was the first exchange in the world to have an exchange-sponsored Socially Responsible Investment (SRI) Index, which explicitly assesses companies on their environmental, social and corporate governance (ESG) performance.
“This was the first step in the JSE’s goal to stress that sustainability challenges matter, and they’re going to matter to market resilience in the long term, as the resilience of those markets is directly linked to our resilience as a society.”
She highlighted the partnership between the JSE and global sustainability rating provider FTSE Russell, and that South Africa is rated as the fifth best globally in terms of ESG average scores for companies listed on the JSE. She stressed the importance of the latter, particularly as there is no mandatory sustainability disclosure requirement for JSE-listed companies.
Soobramoney argued that sustainable practices can be achieved when sustainability is prioritised by company management. Prioritising this kind of approach to governance would also encourage companies to consider how sustainability is linked to other societal challenges.
She noted that South Africa was also home to one of the most advanced corporate governance codes in the world – the King Code of Corporate Governance – which had been in effect since the late 1990s.
This code emphasises planning that integrates economic, environmental and social aspects into value-creation strategies and operations. While this code does not prescribe a specific framework, she added that it did make it clear that governing bodies were expected to follow its guidelines.
She also highlighted how the South African government demonstrated its commitment to the energy transition through its nationally determined contributions.
Further, the JSE opened a Green Bond segment on the exchange in 2017, which makes it easier to list and trade sustainability-linked assets and allows companies to raise funds for sustainable projects.
The stock exchange announced the expansion of the segment into a fully-fledged Sustainability Segment, enabling issuers to list social and sustainability bonds along with green bonds in 2020.
The JSE also publicly launched its Sustainability and Climate Change Disclosure Guidance papers, which were open to public consultation, in December 2019.
Soobramoney added that this was the first step the exchange was taking, in terms of tangible metrics, to making “decision-useful information” and comparable information available to investors in the local market.
“We know that investors want transparency, and we’re pushing for that as the JSE.
We’ve tried to create the enabling environment for capital raising and the credibility that will give international investors the confidence to put their money in this market, and that this money will be well deployed and governed.”
She concluded that South Africa was struggling economically before Covid-19 and that “this green transition poses the largest opportunity we will have for economic growth”.