Financing of Sustainable Development by the Institutional Investors in the Republic of South Africa

The research is aimed at the study of the institutional investments in sustainable development of the Republic of South Africa (RSA). Taking into account the large scale of agenda in the area of sustainable development, the article is focused on financing by the institutional investors of the environmental set of goals of sustainable development.

Aim. To identify factors promoting introduction of the sustainable financing principles in the operation of RSA institutional investors.

Objectives. To identify main components of the implemented strategies of sustainable financing and priority areas of “green’ investments on the example of the number of largest institutional investors of RSA. To study the key initiatives of introduction of the ESG-factors into the institutional analysis and the decision making process by the institutional investors.

Methods. Such general scientific methods of inquiry as analysis, synthesis, and method of scientific abstraction were used for research.

Results and conclusions. NedbankGroup and GEPF started introduction of sustainable financing principles in their operation in early 2000s. The key components of strategies of sustainable financing implemented by them include clear goal setting, availability of internal policy and procedures that allow taking into account the environmental and social risks when making financial decisions, as well as adaptation of the best international practices in the area of financing the projects of sustainable development thanks to participation in the large international initiatives and associations of investors. Since the end of 2011, pension funds of RSA are legislatively obliged to take into account the ESGfactors when making investment decisions. In contrast, in the bank industry the sustainability factors are taken into account on a voluntary basis. Currently, the National Treasury manages development of the national strategic system of sustainable fi

1. Roadmap for financing the 2030 agenda for sustainable development 2019-2021: Executive summary. New York: United Nations; 2019. 16 p. URL: https://www.un.org/sustainabledevelopment/wp-content/uploads/2019/07/EXEC.SUM_SG-Roadmap-Financing-SDGs-July-2019.pdf (accessed on 06.10.2019).

2. From funding to financing: Transforming SDG finance for country success. Geneva: World Economic Forum; 2019. 29 p. URL: http://www3.weforum.org/docs/WEF_From_Funding_to_Financing.pdf (accessed on 06.10.2019).

3. Finance for sustainable development. In: World economic situation and prospects 2017. New York: United Nations; 2017:74-103. URL: https://www.un.org/development/desa/dpad/wp-content/uploads/sites/45/2017wesp_chap3_en.pdf (accessed on 06.10.2019).

4. Sustainable financing and investing survey 2019: Markets alert to the environment and society. Global banking and markets. London: HSBC Bank plc; 2019. 58 p. URL: https://www.gbm.hsbc.com/insights/sustainable-financing/sustainable-financing-and-investing-survey-2019 (accessed on 06.10.2019).

5. A legal framework for the integration of environmental, docial and governance issues into institutional investment. London: Freshfields Bruckhaus Deringer; 2005. 154 p. URL: https://www.unepfi.org/fileadmin/documents/freshfields_legal_resp_20051123.pdf (accessed on 06.10.2019).

6. Fiduciary responsibility: Legal and practical aspects of integrating environmental, social and governance issues into institutional investment. Genève: UNEP FI; 2009. 92 p. URL: https://www.unepfi.org/fileadmin/documents/fiduciaryII.pdf (accessed on 06.10.2019).

7. Publications. Fiduciary duty. URL: https://www.fiduciaryduty21.org/publications.html (accessed on 06.10.2019).

8. Fiduciary duty in the 21st century. Final report. Genève: UNEP FI; 2016. 60 p. URL: http://www.unpri.org/download?ac=9593 (accessed on 06.10.2019).

9. Dudko K.V. International standards for sustainable financing. Vestnik nauki i obrazovaniya = Herald of Science and Education. 2018;2(2):40-43. (In Russ.).

10. Yakovlev I.A., Kabir L.S. Green investment financing mechanism as an element of the national srategy for sustainable development financing. Nauchno-issledovatel’skii finansovyi institut.. Finansovyi zhurnal = Financial Research Institute. Financial Journal. 2018;(3):9-20. (In Russ.). https://doi.org/10.31107/2075-1990-2018-3-9-20

11. Yakovlev I.A., Kabir L.S., Nikulina S.I., Rakov I.D. Financing green economic growth: Conceptions, problems, approaches. Nauchno-issledovatel’skii finansovyi institut. Finansovyi zhurnal = Financial Research Institute. Financial Journal. 2017;(3):9-21. (In Russ.).

12. Global progress report. Sustainable banking network (SBN). Washington, DC: International Finance Corporation; 2018. 74 p. URL: https://www.unepfi.org/fileadmin/events/2018/sydney/SustainableBankingNetwork_Global_Progress_Report.pdf (accessed on 06.10.2019).

13. Creating value by using our financial expertise to do good: Nedbank Group integrated report 2018. Johannesburg: Nedbank Group Ltd.; 2018. 100 p. URL: https://www.nedbank.co.za/content/dam/nedbank/site-assets/AboutUs/Information%20Hub/Integrated%20Report/2018/2018%20Nedbank%20Group%20Integrated%20Report.pdf (accessed on 06.10.2019).

14. Creating value by using our financial expertise to do good: Sustainable development review 2018. Johannesburg: Nedbank Group Ltd.; 2018. 32 p. URL: https://www.nedbank.co.za/content/dam/nedbank/site-assets/AboutUs/Sustainability/Supporting%20Documents/2018%20Sustainable%20Development%20Review.pdf (accessed on 06.10.2019).

15. Who is GEPF? Government Employees Pension Fund (GEPF). URL: https://www.gepf.gov.za/who-is-gepf/ (accessed on 06.10.2019).

16. Government Employees Pension Fund of South Africa. Principles for responsible investment (PRI). URL: https://reporting.unpri.org/surveys/PRI-reporting-framework-2019/49064F70-CDE2-4D358636-876DB4151718/57749b1a39a14fe6942aabb90698b3c1/html/2/?lang=en&a=1 (accessed on 06.10.2019).

17. Annual report 2018: Ensuring your future. Pretoria: Government Employees Pension Fund (GEPF); 2018. 110 p. URL: http://www.gepf.gov.za/wp-content/uploads/2019/07/AR_2018_20181128_Final_Submitted-min.pdf (accessed on 06.10.2019).

18. Investment policy statement. Government Employees Pension Fund (GEPF). URL: http://www.gepf.gov.za/wp-content/uploads/2019/08/GEPF_Investment_Policy_Statement.pdf (accessed on 06.10.2019).

19. SRI in Africa. Africa SRI. URL: http://africasri.co.za/regulatory-frameworks/south-africa (accessed on 06.10.2019).

20. Sustainability of investments and assets in the context of a retirement fund’s investment policy statement. Financial Sector Conduct Authority (FSCA). URL: https://www.fsca.co.za/Regulatory%20Frameworks/Pages/Guidelines.aspx (accessed on 06.10.2019).

21. About the initiative. South Africa Sustainable Finance Initiative 2017. URL: http://sustainablefinanceinitiative.org.za (accessed on 06.10.2019).

22. CRISA: Code for responsible investing in South Africa. Institute of Directors, Southern Africa. 2011. URL: https://cdn.ymaws.com/www.iodsa.co.za/resource/resmgr/crisa/crisa_19_july_2011.pdf (accessed on 06.10.2019).

23. King IV report on corporate governance for South Africa. Institute of Directors, Southern Africa. 2016. URL: https://cdn.ymaws.com/www.iodsa.co.za/resource/collection/684B68A7-B768-465C8214-E3A007F15A5A/IoDSA_King_IV_Report_-_WebVersion.pdf (accessed on 06.10.2019).