Retirement funds in South Africa have a particular mandate to invest for long-term sustainability. Regulations impose duties on the trustees of retirement funds to invest responsibly, and more recent regulations have stepped up on the disclosure as to how they invest. The integrated report, prepared in accordance with the International <I> Framework (<IR> Framework), is well placed for retirement funds to explain their long-term process through which value is created to their members/ beneficiaries and other stakeholders.
Retirement funds that have prepared integrated reports, cite the following benefits:
- The <IR> Framework is a great way to tell what long-term value is being created.
- Trust has increased among our stakeholders.
- The <IR> Framework has helped us respond to changing regulations.
- For credibility, we thought we must prepare our own integrated report if we require investee companies to prepare theirs. Undertaking our own process has been very helpful in understanding their process and the extent of integrated thinking.
- It helped us join the dots and ‘straighten up’ our investment strategy.
- As a business tool it has helped embed integrated thinking in the fund and in its investment philosophy.
- Integrated reporting stitched everything together for us; it brought together all the other sustainability frameworks we apply.
- It has helped us in our strategic planning.
- The benefits for our investment team include: Better due diligence on investee companies after having ESG factors integrated into the investment process; helped the investment team better understand who the fund’s stakeholders are and their interests.
- The <IR> Framework just makes sense.
- It has helped us respond more effectively to the COVID-19 crisis as we have already embedded integrated thinking in our investment philosophy.
- IR is a journey – just get started!
Please see the IR Guidance and Investor pages on this website.
King IV’s Sector Supplement for Retirement Funds – This supplement provides guidance and direction on how the King IV Code should be interpreted and applied by retirement funds in South Africa, and includes the recommendation to prepare an integrated report.
Click here to view the King IV Sector Supplement for Retirement Funds
Batseta, the Council of Retirement Funds for South Africa, focuses on the interests of principal officers, trustees and fund fiduciaries within the retirement industry in South Africa. Betseta is an organisational member of the IRC of South Africa. https://www.batseta.org.za
Some international and SA examples of Retirement Funds’ integrated reports
In the retirement funds sector, Australia is the country that currently produces the most integrated reports, but this is still only a handful of funds. There is much room for expansion in this sector – particularly as the integrated report is so well placed to give a holistic view of a fund for the benefit of beneficiaries and other stakeholders. The IRC of SA is working with the industry organizations to encourage more retirement funds to release integrated reports.
Cbus is one of Australia’s largest pension funds and is widely regarded for its integrated reports and integrated thinking having prepared reports for over six years. It was one of the first organizations in the world to have its integrated report assured. Click here to view the Cbus Annual Integrated Report 2019
This link takes you to an interesting IIRC webinar with David Atkin, CEO of Cbus, speaking on their approach to integrated thinking, reporting and assurance. Assurance specialist Michael Bray shares insights into the assurance process, and pensions expert Keith Ambachtsheer speaks on the value of integrated reporting to investors and asset owners.
VicSuper Annual Report 2019 – click here to view.
Sentinel Retirement Fund Integrated Annual Report 2019 – click here to view.
Regulations and Codes
FSB Circular PF 130 – Good Governance of Pension Funds Principle 7 and Principle 8 of Circular PF 130, issued by the Financial Services Board (FSB) in June 2007, outlines the responsibility of trustees to ensure that “the benefits [of pension investments] are optimised and the associated investment risks are minimised, with these opposing concepts being appropriately balanced against each other.
Regulation 28 of the Pension Funds Act – Regulation 28 of the Pension Funds Act 24/1956 in South Africa, effective July 2011, has prudential guidelines and includes specific reference to ESG integration. It puts the onus on trustees to include ESG factors in determining the material factors that could affect an investment. Retirement funds must explain how they have integrated ESG considerations in their investment policies and disclosures, or why they have chosen not to do so.
FSCA Guidance Note – In 2019, the Financial Services Conduct Authority (FSCA, previously called the FSB) issued a guidance notice (accompanied by a communication) to provide guidance to boards of retirement funds on how to comply with aspects of Regulation 28, in particular how its investment policy statement seeks to ensure the sustainability of its investments and assets, as well as expectations regarding disclosure and reporting on issues of sustainability.
Sustainable Returns for Pensions and Society – The Sustainable Returns for Pensions and Society project was a collaborative retirement industry response to the revised Regulation 28. It set out to provide a consistent framework and set of tools for retirement funds to comply with the new regulation as well as the CRISA Code. In 2013 it released the “Responsible Investment and Ownership – A Guide for Pension Funds in South Africa”.
- This article addressed the Relationship between CRISA, Regulation 28 of the Pension Funds Act and Integrated Reporting
This publication from Deloitte links the regulations to integrated reporting. Although this article was published in the early years of both Regulation 28 and CRISA the principles and intended practices remain unchanged.
- Tomorrow’s Value Achieving long-term financial returns: a guide for pension fund trustees This guide looks at the new view of value and the fiduciary duty of trustees.
- The A4S website offers an ESG toolkit and Maturity Index for pension fund chairs and trustees. Click here to view.