Social Responsible Investing (SRI), or Responsible Investing (RI) as it is now known, will become a larger focus for government in the near future and may even become regulated in the retirement industry. This is according to Windall Bekker, head of investment consulting at OMAC Actuaries & Consultants, who says that amendments made to Regulation 28 of the Pension Funds Act as well as the recent introduction of the Code for Responsible Investing in South Africa (CRISA) highlight the growing importance of SRI when it comes to retirement fund investing.
“RI is an investing strategy that combines financial returns and other factors that determine the long-term sustainability of the business – such as environment, society and governance (ESG). RI can be a way of reflecting the beliefs and values of investors in a meaningful and practical way,” says Bekker.
Global SRI markets
SRI markets are booming in US and Europe. “South Africa is accelerating the trend by launching the Code for Responsible Investing in South Africa (CRISA). Through this code, South Africa became the second country after the United Kingdom to encourage institutional investors to integrate into their investment decisions sustainability issues such as ESG.”
Bekker explains that CRISA is a voluntary code which aims to encourage retirement funds and insurance companies as the owners of assets, as well as their asset managers and consultants, to consider sustainability issues in their investment decisions. “The effective date to report on the application of CRISA was 1 February 2012 and custodians of retirement fund assets are expected to publicly disclose to stakeholders the extent to which they have applied the code.”
Bekker says while it is important to become more conscious of where one is positioned in terms of RI, this does not mean that investors need to change their investments strategy.
“There are tools available that will measure a portfolio based on a number of factors in order to assess the extent to which a portfolio is invested in socially responsible funds. As long as people stay informed about their RI status, they can make informed decisions about any adjustments that may be necessary in future,” he says.
Bekker says many investors who measure their current portfolio will find that they already have a significant portion invested in RI funds.
“Many people still have misperceptions about RI as they assume that it involves an element of charity. Investors need to understand the rationale and take advantage of the long-term, sustainable returns that are the intention of RI investments.”