JSE HONOURS GOOD CORPORATE CITIZENS
JOHANNESBURG, 26 November 2008 – Today, the JSE announced the new constituents of the Socially Responsible Investment (SRI) Index which assesses the environmental, social and economic sustainability practices and corporate governance of listed companies, at an awards ceremony held at the bourse.
This year 61 companies succeeded in becoming index constituents out of the 105 companies reviewed. The number of companies included in the index is up from 58 companies in 2007 and 51 companies when the index was launched in 2003. To join the SRI Index, companies must demonstrate a high standard of reporting and performance in environmental, social and corporate governance areas.
“No longer can these areas be seen as peripheral to companies’s core activities” said JSE deputy CEO Nicky Newton-King. “We see the SRI Index as covering important areas essential to every company’s risk management programme. As such the SRI Index is therefore a practical tool for companies and investors.”
The 105 companies reviewed in 2008 constitute approximately 85% of the JSE’s market capitalisation and make up the largest number of companies ever assessed in the annual review. The ‘automatic universe’ for 2008 consisted of the FTSE/JSE top 40 Index, 60 Mid Cap companies and three Small Cap companies. Two further Small Cap companies opted for voluntary assessment.
This year South Africa’s largest pension fund, the Government Employee Pension Fund (GEPF), is collaborating with the JSE on the SRI Index. The GEPF is using the research in developing its own SRI policies and in the future, plans to use the data as a basis for engaging with listed companies in which the fund is invested. “Today Responsible Investing has become non-negotiable,” says John Oliphant, GEPF Head: Investments and Actuarial. “In 2006 the UN introduced Principles of Responsible investing of which the GEPF is a founding signatory. These Principles encourage investors to integrate Environmental, Social and Governance issues into their investment decision making.”
The research criteria cover three main areas: Environmental, Social and Governance and Related Sustainability Concerns. The research areas consider themes that are globally applicable, whilst at the same time locally relevant. For instance, two research themes – HIV/AIDS and Black Economic Empowerment – are tailored specifically to the South African context and applicable to companies with significant operations within South Africa.
UK-based research organisation EIRIS, a leading research provider in socially responsible investment (SRI), conducted the company assessments. EIRIS currently researches over 2,900 companies globally and provides this information to over 80 clients, including FTSE4Good, pension and retail fund managers, banks, private client brokers, charities and religious institutions across Europe, the USA and Asia. EIRIS’s research involved a review of publicly available company information (including annual reports, sustainability reports and websites) as well as profile and survey responses from companies taking part in the review.
To identify those companies that clearly meet index requirements, the JSE also publishes ‘best perfomers’ after each review. The 2008 index review comprises of 21 ‘best performers’ that span industry sectors, including among others financial services companies, construction groups, food producers, and resources stocks. The mining sector, a clear leader in this respect, accounts for six of the best performers.
The 2008 SRI Index is composed of 35 Top 40 companies, 20 Mid Cap companies and three Small Cap companies in 2008. The mining sector performed particularly well in this year’s review, with 12 out of 17 companies achieving the minimum index requirements. The general financials and life insurance companies also performed. Seven other sectors including banks, construction and materials, food producers, general financials, general retailers and life insurance hold a strong presence in the index.
“Our aim is for companies to use the index criteria as a South African standard against which good triple bottom line practices are measured, greatly encouraging awareness of the importance of sustainability matters for business, and especially within financial community which has been underexposed to the important considerations of sustainable development,” says Head of the SRI Index Michelle Joubert.
About three quarters of companies Mid and Small cap companies that were assessed for the first time during 2008 failed to make the minimum requirements for the 2008 index review. While this may appear disturbing on the surface, a more detailed analysis suggests several reasons for the trend. At least 15 of these companies failed to meet the criteria due to their corporate structures which exclude them from meeting the criteria. Property investment companies; funds; holding companies fall into this category. Other new participants failing to meet requirements cited fewer resources and a lack of familiarity with the review process as reasons for not meeting requirements. Moreover several new participants suggested that SRI review would spark improvements.
Although certain issues like governance and so forth can be standardised, issues of social sustainability will differ from country to country. As such there is a need to decipher the principles and interpret them in the context of South Africa.
The JSE’s three pillar approach is such an attempt, as companies are evaluated on key issues relevant to South Africa – such as transformation, BBBEE, and employee occupational health and safety including HIV/AIDS just to mention a few examples. Mr John R Oliphant
The 2008 index review involved the assessment of existing index constituents as well as new companies added to the automatic universe and further volunteer companies.
Additional information included: – list of constituents – best performers – quotations from some of the companies – SRI Index Advisory Committee
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, agricultural derivatives and interest rate instruments. The JSE Ltd offers the investor a truly first world 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
About GEPF: Established in 1996 through the consolidation of various funds, including the Government Service Pension Fund, the GEPF is the largest pension fund administrator in Africa with more than R700 billion of assets under management. The Fund is managed by a Board consisting of equal employer and member representation.
For further information, please visit http://www.gepf.gov.za/
ISSUED BY: Victoria Williams Corporate Communications Consultants (Pty) Ltd
Tel: (011) 783 8926 Fax: (011) 783 7608
ON BEHALF OF: Michelle Joubert, Head of SRI Index, Strategy & Legal Counsel Division, JSE Limited
Tel.: +27 11 520 7080 Email: email@example.com