Johannesburg - The draft code for responsible investing by institutional investors in South Africa has been released for public comment, it was announced on Monday.
The committee on responsible investing by institutional investors in South Africa said the public would have until October 31 to comment.
"The (United Kingdom) is the only other country with a code for institutional investors," said committee chairperson John Oliphant, who also heads investments and actuarial at the government employees' pension fund (GEPF).
He said that in 2006, the United Nations introduced the principles of responsible investing, of which the GEPF was a founding signatory.
"These principles, adopted by a number of SA institutional investors, encourage investors to integrate environmental, social and governance (ESG) issues into their investment decision-making."
The draft code was the next step in ensuring that institutional investors implemented policies that guided their day-to-day actions when it came 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."
Oliphant said responsible investing and corporate governance guidelines in South Africa were largely voluntary.
"The code aims to put in place the checks and balances needed to make this voluntary framework successful."
According to Oliphant, anyone expecting a tome of principles would be disappointed.
XXXSimple yet powerful
The draft code consisted of simple, yet powerful, voluntary principles that encouraged 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 SA consists of four principles, with the first two principles encouraging institutional investors to formulate policies that will guide their approach to being responsible shareholders."
Principles three and four required institutional investors, within the realms of the law, to ensure that the principles were implemented, upheld and, most importantly, disclosed.
Oliphant said that the code encouraged 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."
They would will also empower those beneficiaries to select responsible custodians for their investments.
Responsible investing had become a non-negotiable, Oliphant said.
"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 urged institutional investors and other interested parties to take the time to consider the draft code and to come up with constructive input.
The draft code can be downloaded from www.iodsa.co.za. Comment can be emailed to crisacomment@iodsa.co.za.