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JSE ESG Investor Briefing 2014 – more of the same?

12 September 2014

The JSE held its annual ESG Investor Briefing on 9 September. Seven companies (Exxaro Resources, FirstRand, Netcare, Kumba Iron Ore, Woolworths, AngloAmerican Platinum and Vodacom) presented on their sustainability strategies and environmental, social and governance (ESG) performance. Liberty Life was a late withdrawal.

Here are some thoughts on the day:

  1. In a positive step, the JSE encouraged companies to use the Value Driver Model, which has been developed by the UN-supported Principles for Responsible Investment and the UN Global Compact to facilitate company-investor communications. This was intended to meet investor needs for relevance, comparability and integration in financial analysis, but still allow for unique content.
  2. While several presentations repeated PR fluff around sustainability journeys, the overall standard of presentations was higher than 2013. For some reflections on last year’s event, see Incite’s blog here.
  3. Companies are still struggling to present a sustainability investment case reflecting how ESG issues are integral to their strategy. Clear messages on the material value drivers and how sustainability initiatives related to a company’s key financial metrics were often missing. Also real ESG challenges such as the environmental impacts of mining were glossed over.
  4. The two issues that probably received the most attention were corporate governance (although most companies failed to explain how their executive leadership is tackling sustainability issues) and energy efficiency. Labour issues also featured strongly for the two mining companies.
  5. Questions from investors tended to focus on specific issues, rather than the sustainability investment case. Issues raised spanned board diversity, garnishee orders, BEE codes, housing obligations, healthcare affordability, water use and staff retention programmes.
  6. With most questions coming from a handful of attendees, it felt as if the level of audience engagement was limited. Presumably, investors continue to prefer to ask questions behind closed doors rather than in a public forum. It is also difficult to engage companies on details at such an event. This, coupled with the relatively poor attendance by key individuals in South Africa’s SRI/ESG community, suggests that some changes might be necessary to ensure the event remains relevant.
  7. The seven companies that made presentations and answered questions deserve praise for taking the time to participate, but there is a tendency to see the same companies year after year. Three of the companies (Woolworths, Exxaro and FirstRand) as well as Kumba’s parent company Anglo American presented in 2013. While this allows investors to see improvements and get insights from some market leaders, more diversity in the companies would be welcomed.

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