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Code for Responsible Investing by Institutional Investors in South Africa (crisa)
The Code for Responsible Investing in South Africa (CRISA) was launched on 19 July 2011. This makes South Africa the second country next to the United Kingdom to formally encourage institutional investors to integrate into their investment decisions sustainability issues such as environmental, social and governance (ESG).
CRISA aims to provide the investor community with the guidance needed to give effect to the King Report on Corporate Governance South Africa (King III) as well as the United Nations-backed Principles for Responsible Investment (PRI) initiative. Both require institutional investors to take ESG issues seriously.
CRISA applies to institutional investors such as pension funds and insurance companies as the owners of assets, and their service providers including asset managers and consultants. It encourages institutional investors and service providers to adopt its principles and practice recommendations on an 'apply or explain' basis. The effective date for reporting on the application of CRISA is 1 February 2012.
Responsible investing and corporate governance guidelines in South Africa are largely voluntary. The Code aims to put in place the checks and balances needed to make this voluntary framework successful. Together with the King Report, which is also not legislation but rather principles and practices that are adhered to on an ‘apply or explain’ basis, the new Code will seek to encourage best practice conduct by shareholders and companies. In summary, CRISA consists of five principles:
- Principle 1 – An institutional investor should incorporate sustainability considerations, including ESG, into its investment analysis and investment activities as part of the delivery of superior risk-adjusted returns to the ultimate beneficiaries.
- Principle 2 – An institutional investor should demonstrate its acceptance of ownership responsibilities in its investment arrangements and investment activities.
- Principle 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.
- Principle 4 – An institutional investor should recognise the circumstances and relationships that hold a potential for conflicts of interest and should pro-actively manage these when they occur.
- Principle 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 informed assessments.
The Code requires institutional investors to fully and publicly disclose to stakeholders at least once a year to what extent the Code has been applied. If an institutional investor has not fully applied one of the Principles of the Code, the reasons should be disclosed. Disclosure as well as policies should be made public.
CRISA has been endorsed by the Institute of Directors in Southern Africa (IoDSA), the Principal Officers Association (POA), and the Association for Savings and Investment South Africa (ASISA). The principles of CRISA are supported by the Financial Services Board (FSB) and the Johannesburg Stock Exchange (JSE).