Possibly one of the most influential stakeholder groups in any business, particularly those that seek external equity or loan funding, is the investor community.  Historically, the demands placed by investors on corporates have tended to focus on profitability, cash flow and dividend streams.  As new regulation was brought into play, such as the King Report on Corporate Governance, attention on governance issues increased and awareness was raised around corporate social responsibility.

The past decade has seen the establishment of so-called ‘sustainability indexes’ on a number of stock exchanges around the world, the most notable of which are the Dow Jones Sustainability Index, the FTSE4GOOD index and our very own JSE Socially Responsible Investment (SRI) index.

The Equator Principles were launched in 2003 as a credit risk management framework for determining, assessing and managing environmental and social risk in project finance transactions.

The United Nations Principles of Responsible Investment (UN PRI) was launched in 2006 with the aim of helping investors to integrate the consideration of environmental, social and governance (ESG) issues by institutional investors into investment decision-making.

The past 18 months have seen a significant shift in regulation that is driving companies and the investor community in particular towards integrating sustainability considerations into their core business practices. The most notable of these regulations are King III, Regulation 28 of the Pension Fund Act of 1956 and the Code for Responsible Investing in South Africa (CRISA).

Despite all of the above, the investor community has, on the whole, been relatively slow to consider so-called ‘ESG’ (environmental, social, governance) issues as core factors in their investment management decisions.  However, a number of factors seem to be at play that are now forcing investors to take these issues more seriously.

The Moss Group set out early in 2011 to understand this apparent evolution, particularly within the South African context.  We have been actively engaging with key players in the investment community over the past 6 months to gain insight into whether or not this change is actually happening and if so, why it is so.  We have also been exploring the points of view of the various players in terms of how they practically are integrating, or plan to integrate sustainability considerations into their investment decisions.

We have concluded the research and are in the process of analysing the results.  We will be sharing our insights in two breakfast workshop events, one in Johannesburg and one in Cape Town in in the last quarter of 2011 . Contact us for more information on the events