SOUTH AFRICA Trends and Developments Contributed by: Professor Michael Katz, Matthew Morrison, Madison Liebmann and Sinovuyo Damane, ENS
outcomes, and ensure that appropriate ethical safe - guards are in place. The Evolution of ESG ESG as an overarching concept is in a state of evolu - tion and certain key components are the focus of the current global political discourse, however, its indi - vidual pillars remain relevant in their own right as each evolves. We consider certain of those key pillars and the related developments below. Climate sustainability The signing of the Climate Change Act 22 of 2024 into law by the President on 23 July 2024 marked a water - shed moment for South African climate governance. The Act provides a robust framework for co-ordinating South Africa’s response to climate change, mandat - ing sectoral emission targets, carbon budgets for sig - nificant emitters, and the development of greenhouse gas mitigation plans. Companies that are allocated a carbon budget, that is, significant emitters conduct - ing listed greenhouse gas activities above prescribed thresholds, identified from verified emissions reported under the national GHG reporting system and within sectoral emission targets, must prepare and submit mitigation plans to the Department of Forestry, Fish - eries and the Environment for approval. The carbon tax, introduced in 2019 under the Carbon Tax Act 15 of 2019, is entering its second phase from 1 January 2026. Energy, just transition and trade risks South Africa’s participation in the Just Energy Transi - tion Partnership, established at the 2021 UN Climate Change Conference in Glasgow (commonly referred to as COP26), continues to support the country’s decarbonisation pathway. The Electricity Regula - tion Amendment Act 38 of 2024 came into force on 1 January 2025, promoting the restructuring of the electricity supply industry and encouraging com - petition in generation. South Africa submitted its revised Nationally Determined Contribution for 2035 in October 2025. The European Union’s Carbon Bor - der Adjustment Mechanism (CBAM), commencing in 2026, represents a significant transition risk for South African exporters in sectors such as iron and steel, cement and aluminium. Boards must ensure that cli - mate risk is embedded within enterprise risk manage -
ment frameworks and that disclosure practices meet evolving international standards. Human capital, equity and inclusion King V reinforces the stakeholder-inclusive approach to governance. The enhanced obligations on social and ethics committees (SECs) under recent amend - ments to the Companies Act, including the require - ment for companies required to establish an SEC, to present an SEC report and appoint the SEC at the company’s annual general meeting, underscores the growing importance of corporate citizenship. Sections 30A and 30B of the Companies Act, intro - duced by the Companies Amendment Act 16 of 2024 and which came into force on 22 May 2026, require public and state-owned companies to prepare a remuneration policy for shareholder approval by ordi - nary resolution and to present remuneration reports each year to shareholders at annual general meetings. Subject to the above-mentioned remuneration resolu - tions prescribed under the Companies Act, companies required to establish SECs are recommended under King V to submit their executive remuneration policies and statutory remuneration disclosure for non-binding advisory votes by shareholders. King V also requires more detailed disclosure on mat - ters such as whether executives are required to hold minimum shareholdings, the exercise of malus, for - feiture and clawback provisions, and whether boards exercised overarching fairness discretion in formula- based remuneration. These requirements are in line with the heightened focus globally on transparency of executive remunera - tion and the pay gap between the highest and lowest paid employees in companies. Fundamentals of long-term sustainability King V highlights a philosophical focus on systems value creation in the economic, social and environ - mental context in which they operate, recognising that their long-term success relies on the vitality and resil - ience of the surrounding socio-ecological systems.
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