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The code for responsible investing in South Africa
By Deshara Pillay
Legal and Governance Advisor, The Institute of Directors Southern Africa

RISA or “The Code for Responsible Investing in South Africa” became effective on 1 February 2012.  The Code is endorsed by the Institute of Directors in Southern Africa, the Principal Officers Association, the Association for Savings and Investment South Africa, the Financial Services Board and the Johannesburg Stock Exchange.

The code is intended to give guidance on how the institutional investor should execute investment analysis and investment activities.  It also addresses how institutional investors should exercise their rights with a view to promoting sound governance.

Together with the King Code, CRISA provides a framework for all stakeholders in the overall governance system, including boards of companies, institutional shareholders, their service providers and the ultimate beneficiaries.  This framework aims to ensure that governance is practised in a manner that yields better performing companies as they deliver both economic value, as well as environmental and social value.  The approach that considers value as encompassing economic, social and environmental value, which are the approaches followed in both CRISA and the King Code, will in the long term, be in the interest of the ultimate beneficiaries.

CRISA’s principles are effective on an “apply or explain” basis. This implies that the application of CRISA is a voluntary, principle-based approach, as opposed to a rule based-approach.

The purpose of CRISA is to form part of an effective governance framework in South Africa.  Furthermore, it is proposed that foreign pension funds, insurance companies, investment trusts and other collective investment vehicles apply CRISA to the extent that they invest in South African companies.

CRISA is applicable to institutional investors like pension funds and insurance companies, as well as its service providers. However, it is the institutional investor who bears accountability to their ultimate beneficiaries as a result of their legal fiduciary duties owed to these beneficiaries.

CRISA defines an institutional investor as any legal person or institution referred to in the definition of “financial institution”” in section 1 of the Financial Services Board Act No 97 of 1990, to the extent that these legal persons or institutions own and invest in the equity of the company and have obligations in respect of investment analysis, activities and returns to ultimate beneficiaries.  Ultimate beneficiaries are defined as the end-beneficiaries or underlying investors such as individual savers or pension fund members to whom institutional investors owe their duties, including individual retirement fund beneficiaries and the individuals in whose names and on whose behalf unit trusts and policies are held. Service providers are defined as those who act under a mandate of the institutional investor in respect of any of the investment decisions and investment activities dealt with in CRISA, including any asset and fund managers and consultants.

CRISA encompasses 5 key principles:

(For a detailed explanation into these principles CRISA may be downloaded from or or www.unpri.or ).

  1. An institutional investor should incorporate sustainability considerations, including environmental, social and governance, into its investment analysis and investment activities as part of the delivery of superior risk-adjusted returns to the ultimate beneficiaries.
  2. An institutional investor should demonstrate its acceptance of ownership responsibilities in its investment arrangements and investment activities.
  3. Where appropriate, institutional investors should consider a collaborative approach to promote acceptance and implementation of the principles of CRISA and other codes and standards applicable to institutional investors.
  4. An institutional investor should recognise the circumstances and relationships that hold a potential for conflicts of interest and should proactively manage these when they occur.
  5. Institutional investors should be transparent about the content of their policies, how the policies are implemented, and how CRISA is applied to enable stakeholders to make their informed assessments.

CRISA proposes that the following policies be disclosed publicly by institutional investors and its service providers:

  1. A policy on the incorporation of sustainability considerations into investment analysis and investment activities as set out in principle 1.
  2. A policy with regard to ownership responsibilities as set out in principle 2.
  3. A policy on the identification, prevention and management of conflicts of interest as set out in Principle 4.

CRISA further proposes that there should be regular engagements between institutional investors and all their stakeholders with a view identifying and understanding information requirements. Institutional investors should disclose, at least once a year, the extent of their application of CRISA (CRISA principle 5.11). 

If the institutional investor does not apply any of the principles of CRISA, or if they are applied differently to how they are set out, there should be transparency and disclosure of the reasons for this and of the alternative measures employed (CRISA principle 5.12).

These disclosures should be made in public so that they are readily accessible to all stakeholders of the institutional investor (Principle 5.13).

The Chairman of CRISA, Mr John Oliphant has, in his foreword to the Code, called upon the leaders, who are involved in the long-term savings industry, to pledge their support to CRISA.  Such a pledge will not only reflect our willingness to change but would go a long way in ensuring that the investments that we make, on behalf of others, are sustainable in the long term.

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