Environmental, social and governance (ESG) investing has gained significant prominence in both South Africa and globally, playing a crucial role in the investment arena. Investors recognize the importance of considering environmental, social and governance factors in their financial analysis. By incorporating ESG issues, investors aim to enhance their understanding of the companies they invest in and improve their internal investment processes.
Legal considerations affecting ESG in South Africa include the following:
• Section 76(3) of the South African Companies Act, 2008 imposes a duty on directors to act in the company's best interests with the necessary care, skill and diligence.
• In addition, in terms of the Companies Act, companies with a public interest score of 500 or more must establish a social and ethics committee to monitor various aspects, including social and economic development, corporate citizenship, and compliance with legislation such as the Broad-Based Black Economic Empowerment Act.
• The National Environment Management Act, 1998 holds directors jointly and severally responsible for any environmental harm caused by the company.
• The King Code on Corporate Governance, published by the IODSA, guides directors in overseeing the company's impact on society, the environment, the economy and the workplace.
• The Occupational Health and Safety Act places responsibility on the CEO to ensure a safe working environment.
• The Code for Responsible Investing in South Africa 2 (CRISA 2), launched by the CRISA Committee in September 2022, builds on the first CRISA Code (2011) and contains five voluntary principles for stewardship and responsible investment as a key component of the South African governance framework.