Practical steps for trustees
One of the first steps in aligning your retirement fund with the environmental, social and governance movement is by integrating these important principles into your investment policy. Here’s how to get started.
1 Develop an ESG framework
Include clear definitions of what ESG means for your fund. Customise the criteria to reflect local realities and issues that matters to members —such as water shortages, coal dependence, unemployment, transformation,B‑BBEE performance, supporting small and medium-sized businesses that create jobs, ensuring women have equal access to economic opportunities, and building stronger community relations.
2 Anchor ESG in your Investment Policy Statement
Don’t treat ESG as a side project. Build ESG considerations into the fund’s core investment rules. Include it across all asset classes instead of only in “green” investments. The policy should also align with Regulation 28, King IV, CRISA, and UN PRI principles.
What does it stand for?
King IV → Corporate governance code encouraging ethical, sustainable decision-making.
CRISA → Code for Responsible Investing in South Africa.
UN PRI → United Nations Principles for Responsible Investments.
3 Work closely with investment consultants
Asset consultants are key partners—they educate trustees, help embed ESG into mandates, and build your ESG policy. Ensure they include ESG requirements in requests for proposals to asset managers and due diligence questionnaires, and mandate designAlso, make sure ESG reporting duties are written into the contracts and service level agreements with asset managers so that you can hold them accountable.
4 Engage asset managers on ESG expectations
When selecting or reviewing managers, ask how they address climate risk, Eskom’s instability, water shortages, and social inequality in their investment decisions. And require them to report regularly on ESG metrics, not just financial returns.
Also include questions:
- How do they measure ESG performance?
- How do they handle high-risk sectors like coal or mining?
- What local impact (jobs, transformation, community investment) do they consider?
5 Integrate ESG into strategic asset allocation
Don’t pick the “best” asset mix purely on financial grounds and then check for ESG afterwards; build ESG into the decision from the start. Consider more allocations to low-carbon transitioning companies, green bonds, or other ESG-aligned sectors. The aim isn’t to sacrifice returns for “doing good” — it’s to find ESG-aligned investments that still meet the fund’s performance and risk requirements.
What are green bonds? Debt used to finance environmentally friendly projects such as the development of electric cars or the operation of wind farms.
6. Establish governance & oversight mechanisms
Set up formal structures to manage ESG activities, such as a board subcommittee dedicated to ESG or responsible investing with clear lines of accountability. Hire an independent third party (auditor or ESG assurance provider) to check that your ESG reporting is accurate, complete, and not misleading and aligned with FSCA’s sustainable finance work, IFRS S1/S2, or other emerging standards.
What are IRFS Standard 1 and Standard 2? IRFS refers to the International Financial Reporting Standards. IFRS S1 sets global rules for companies to report all sustainability risks, while IFRS S2 requires detailed disclosure on climate risks.
7 Keep members informed and involved
Give members clear, easy-to-understand updates on how the fund is dealing with ESG issues—both the wins and the challenges. This builds trust and shows that trustees are serious about protecting workers’ pensions for the long term. Create space for members to share their views or concerns on ESG priorities.
8 Ongoing trustee training
Trustees must keep learning. Make sure you and your fellow trustees get regular training on ESG and stay updated on new rules or regulations. This will help you make better decisions and hold service providers accountable.
Sources
EBNet: ESG and South African Pension Funds: A Trustee’s Guide
Moore South Africa: The Imperative of ESG Considerations in Retirement Fund Investment Policies
OpenUCT: Understanding the role played by Pension Fund Trustees and Investment Consultants in Responsible Investment Strategies in South Africa
Pensions World SA: Are your retirement fund’s ESG strategies sustainable?
Summit Africa: Embracing Responsible Investing for a Sustainable South African Future
Funded by
