South African listed companies make progress tackling Climate Change
JSE’s 2011 SRI Index annual review results
JOHANNESBURG, 6 DECEMBER 2011 – Two thirds of JSE-listed companies assessed on behalf of the JSE by global investment research provider EIRIS (with their local partner at the University of Stellenbosch Business School), fulfil the base requirements to become a constituent of the exchange’s Socially Responsible Investment (SRI) Index.
The exchange today released the findings of the 2011 annual SRI Index review (which reviewed 109 companies, including the JSE’s biggest) which aims to encourage integrated risk management among companies and to prompt investors to use responsible investment strategies.
The announcement was made in Durban in parallel to the 17th Conference of the Parties on climate change (COP 17). JSE Director of Government and International relations, Geoff Rothschild, commented at the event that “the JSE recognises climate change as being one of the most significant sustainability challenges facing us at this time. There is a need for anyone who considers themselves a responsible global citizen to make the necessary changes towards a more sustainable existence in order to safeguard the future of both our species and the planet.”
The SRI Index comprises listed companies which meet criteria related to their environmental, social and governance (ESG) policies, management practices and reporting. The first of its kind in an emerging market, and a leader worldwide, the index’s intention is two-fold: to encourage companies to operate responsibly and transparently and to prompt institutions to consider ESG factors when evaluating potential investments. Following its inception in 2004, the SRI Index has become a significant benchmark for broad-based environmental, social and governance practice amongst local listed companies.
“We remain impressed with how willing companies are to seriously engage on issues. The increasing depth of discussion and extent of company responses supplied affirm that companies now see ESG principles as very much a part of normal business practice, and this is reflected in this year’s SRI Index composition,” says Corli Le Roux, Head of the JSE SRI Index.
In the 2011 SRI Index review –
- 109 companies were assessed, 9 for the first time;
- 83 of those assessed submitted detailed profiles and responses. This response rate is particularly high, both in local and global terms;
- 67.9% of the total assessed companies qualified for the SRI Index, with a resulting Index constituency of 74 companies;
- Three companies are in the Index for the first time;
- 22 companies have been identified as best performers, meeting a higher threshold than in 2010;
- Three of these qualified as best performers for the first time.
With consistent strong performance in relation to social and governance issues, environmental practices remain a hurdle for companies, despite demonstrating improvement in this year’s review. The higher climate change entry threshold for 2011 also proved a challenge.
The mining and banking sector continue to perform well, and this year all companies in the sectors for Construction & Materials, General Financial, Industrial Metals and Life Insurance qualified.
Dovetailing off these results, the JSE commissioned a study into the extent to which leading South African companies are tackling climate change. The research focused on the ‘Top 40’ large cap South African companies listed on the JSE SRI index.
The analysis reveals encouraging signs of progress through improved governance, better strategies and more disclosure on climate change. Overall, 95% of companies analysed demonstrate at least some form of response to climate change. But only 30% of the companies analysed have demonstrated reductions in their operational GHG emissions over the past few years.
Says Le Roux: “The JSE ‘Top 40’ companies have certainly made some progress on climate change to date. However, much more still needs to be done to reduce their own climate change impacts and to better plan for how they will operate in a world that has been altered by climate change.”
Conclusions of the JSE Top 40 Climate Change Report are:
- 73% of JSE Top 40 companies demonstrate a good overall response to climate change;
- 95% of companies published commitments on climate change and have senior staff responsible for the issue;
- 60% of companies have set short-term GHG emissions targets, but only 23% have set long-term targets, leaving considerable room for improvement;
- 95% of companies are disclosing absolute CO2 emissions and 85% are disclosing normalised emissions;
- 30% of companies have reduced CO2 emissions over the last few years;
- 35% of companies have linked performance on climate change to manager’s remuneration;
- Mining and banks sectors – the two largest sectors amongst the JSE Top 40 - demonstrate a high quality response to climate change overall.
Le Roux concludes: “From the JSE’s perspective, the priority for the SRI Index in 2011 has been strengthening investor relationships, particularly with fellow signatories of the PRI (Principles for Responsible Investment). Going forward, our focus will be to expand the availability of analysis on company performance from the SRI Index process, an area which has been highlighted as a need for investors to strengthen their engagement with and investment in companies. Through the evolution of the SRI Index the JSE aims to continue to identify opportunities to encourage transparency and responsibility in relation to ESG concerns.”
The JSE, a central player in the local economy, sees itself as influencer and regulator of listed companies. Its sustainability activities include company regulation (the Listings Requirements include a requirement to apply King III or explain where this has not occurred), investment tools (such as the SRI index and customised products), sustainability advocacy and a growing focus on internal sustainability.
About JSE Limited
As South Africa’s only full service securities exchange, the JSE connects buyers and sellers in four different financial markets, namely equities, equity derivatives, commodity derivatives and interest rate instruments. The JSE Ltd offers the investor a truly first world-class trading environment, with world class technology, surveillance and settlement in an emerging market context. It is amongst the top 20 largest equities exchanges in terms of market capitalisation in the world.
For further information, please visit www.jse.co.za
ISSUED BY:
Victoria Williams/Renata Da Silva
Corporate Communications Consultants
Tel: +27 11463 2198
Email: victoria@corpcom.co.za or renata@corpcom.co.za
ON BEHALF OF:
Corli le Roux
Head of SRI Index
JSE Limited
Email: CorliLR@jse.co.za
Further notes:
South African companies switched on to climate change - but challenges remain
As delegates from around the world gather this week in Durban for the COP17 UN climate talks, EIRIS' latest report explores the extent to which companies in South Africa are on track to tackle climate change.
With the Kyoto emission targets running our next year, the South African government has openly recognised the need for an urgent response to climate change which threatens economic growth, sustainable development, agricultural production, food security and commodity prices in the region.
Last week, the country's environment minister Edna Molewa, pointed out that in Africa alone 70 million people and nearly a third of the continent's coastal infrastructure could be flooded if global warming raises sea levels by 1 metre by 2080 as some scientists predict.
Commissioned by the Johannesburg Stock Exchange (JSE), EIRIS' latest research assesses the climate change performance of the 'Top 40' largest companies (by market capitalisation) listed on the JSE. Encouragingly, the research finds that 73% of these companies are demonstrating a 'good' overall response to the climate change risks they face. However, many are failing to take on the extra initiatives they need to fully tackle the issue.
Key research findings:
- Risk management 73% of JSE Top 40 companies demonstrate a good overall risk response to climate change.
- Targets 60% of JSE Top 40 companies have set short-term GHG emissions targets, but only 23% have set long-term targets, leaving considerable room for improvement
- Disclosure 95% of the JSE Top 40 are disclosing absolute CO2 emissions and 85% are disclosing normalised emissions
- Emission reductions 30% of companies have reduced CO2 emissions over the last few years
- Remuneration 35% of companies have linked performance on climate change to board/senior management level remuneration
- Leading sectors Mining and banks sectors - the two largest sectors amongst the JSE Top 40 - demonstrate a high quality response to climate change overall Valeh Tehranchi, Research Analyst at EIRIS and report author said "It's great to see South African companies making progress but they must do more to both reduce their own impacts and to plan for how they will operate in a world that has been altered by climate change. Linking remuneration to climate change mitigation targets, establishing long-term GHG emissions reduction targets and quantifying climate change risks are some of the areas where there is the biggest scope for improvement amongst JSE companies".
Corli le Roux, Legal Counsel and Head of SRI Index at the JSE said "We are truly encouraged by the commitments we are seeing from our companies.
Plenty of scope remains for engagement, as failure to address climate change could damage reputations and profitability as more significance is given to climate change by investors and other key stakeholders. We look forward to continuing this journey towards achieving the change which may impact the very survival of our species and the planet".
Press contacts:
Mark Robertson | Head of Communications | mark.robertson@eiris.org
Tel: +44 (0)20 7840 5741 | +44 (0)7725 594 537 (mobile)
Notes to editors
- The EIRIS/JSE report 'To what extent are leading South African companies tackling climate change?' explores corporate responses to climate change amongst South African companies. Commissioned by the Johannesburg Stock Exchange (JSE), the research focuses on the 'Top 40' largest companies (by market capitalisation) listed on the JSE. EIRIS classifies the Top 40 South African companies into 20 sectors according to their business activity. A range of climate change response indicators are then used to assess how well each company is responding to climate change.
- EIRIS
www.EIRIS.org
EIRIS is a leading global provider of independent research into the environmental, social, governance (ESG) and ethical performance of companies. An independent, not-for-profit organisation, we work to help our clients develop the market in ways that benefit investors, asset managers and the wider world. Our mission is to empower responsible investors with independent assessments of companies and advice on integrating them with investment decisions. EIRIS now provides responsible investment services to more than 100 asset owners, asset managers, banks, stock brokers and governments around the world - as well as major index providers. We have over 25 years' experience of promoting responsible investment and helping consumers, charities and advisers invest responsibly.