SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison and Madison Liebmann, ENS
2.2 ESG Considerations The important ESG issues in South Africa include the attainment of sustainable development, a just energy transition, black economic empow - erment, climate change resilience, employment equity, improved governance and the introduc - tion of anti-corruption practices. South African regulators and certain organisations have taken various steps to address these issues, some of which are discussed below. Obligations of JSE-Listed Companies The majority of ESG disclosures or reporting obligations are voluntary. However, companies listed on the JSE have mandatory reporting obligations with respect to sustainability. In this regard, the Listings Requirements suggest that integrated reporting on sustainability is to be applied on an “apply and explain basis” . King IV requires companies to report annually in an integrated manner and to promote good governance and transparency in leadership and decision-making. King IV also emphasises sustainability reporting. In July 2021, a King IV Guidance document titled “Responsibilities of Governing Bodies in Responding to Climate Change” was published in order to assist gov - erning bodies to respond to climate change and to take the required action. Furthermore, the JSE launched its JSE Sustain - ability Disclosure Guidance and JSE Climate Change Disclosure Guidance in 2022. The JSE’s disclosure guidance documents are based on international best practice and are an important distillation of the recommendations of multiple global initiatives on sustainability and climate risk disclosure, including GRI Sustainability Reporting Standards, the Taskforce on Climate- related Financial Disclosures recommendations, the IFRS Foundation’s ISSB prototypes and the
Value Reporting Foundation’s Integrated Report - ing Framework and Sustainability Accounting Standards Boards. They are also not manda - tory, but bring much-needed guidance for con - sistent, comparable, transparent and reliable disclosures. Regulation 28 of South Africa’s Pensions Funds Act, No 24 of 1956 requires funds to consider all factors (including ESG) that may be relevant to the long-term success of a fund. In this regard, a guidance note published in 2019 by the Finan - cial Sector Conduct Authority (FSCA) sets out the FSCA’s expectations regarding certain dis - closure and reporting requirements relating to sustainability. South Africa’s first national Green Finance Tax - onomy was published in April 2022. Although reporting against the taxonomy is not yet man - datory, it provides a useful benchmark for inves - tors, issuers, lenders and other financial sector participants to track, monitor and demonstrate the credentials of their green activities in a more consistent and efficient way. ESG reporting requirements are also contained in specific legislation that seeks to deal with environmental impact – eg, reporting obliga - tions stipulated as conditions to environmental authorisations under the National Environmental Management Act, No 107 of 1998 or conditions to atmospheric emission licences under the National Environmental Management: Air Qual - ity Act, No 39 of 2004. Furthermore, certain cat - egories of emitters are required to report on their emissions under the National Greenhouse Gas Emission Reporting Regulations (published in GN 275 of 3 April 2017) (GHG Reporting Regu - lations). Sectors covered by the GHG Reporting Regulations include energy, transport, industry, agriculture and forestry.
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