In the past six months, Just Share has made submissions in four public consultation processes relevant to our goal of using responsible investment as a catalyst to drive urgent climate action and reduce inequality:
- National Treasury’s 2020 Draft Technical Paper on Financing a Sustainable Economy
- Code for Responsible Investing in South Africa: 2020 Revision Draft
- National Minimum Wage Commission’s Proposal for Annual Adjustment
- International Financial Reporting Standards (IFRS) Foundation: Consultation Paper on Sustainability Reporting
We set out brief summaries of our comments on each of these below, as well as links to the full submissions.
1. National Treasury: 2020 Draft Technical Paper on Financing a Sustainable Economy
The Draft Technical Paper is positioned as a “framework for financial institutions to better disclose public information on their green practices and investments”. It follows in the wake of the growing global focus on embedding resilience and long-term value into the economy, and “thereby contributing to the delivery of the sustainable development goals and climate resilience”. Key points from our submission include:
- Just Share welcomed the Draft Technical Paper’s recognition that we must take urgent steps “to protect the natural resource base and economy in the face of climate change and to create resilience in order to protect all citizens”.
- However, given the key role that civil society activism has played across the globe as a driver of sustainable finance, it is concerning that the dialogue that preceded the publication of the Draft Technical Paper included only members of “key regulatory and industry stakeholders”. It is even more concerning that the Paper’s recommendations do not appear to envisage participation by civil society, labour, or affected communities. Just Share called on National Treasury to ensure that these stakeholders are meaningfully included in the future development of this important framework.
- We expressed concern that the Draft Technical Paper places significant emphasis on further industry engagement and the adoption of voluntary initiatives “as a precursor to regulation”. It is abundantly clear that existing voluntary initiatives have not delivered in creating a more equal and sustainable economy. We do not need more of them, and they are a wholly inappropriate mechanism for driving the urgent action that the Paper recognises is required. South Africa already has appropriate legislative and regulatory frameworks which allow for the integration of climate change-related risks and opportunities. The focus should be on implementation of existing requirements, and introduction of new mandatory requirements for disclosure; for example reporting in terms of the Recommendations of the Task Force on Climate-Related Financial Disclosures.
2. Code for Responsible Investing in South Africa (CRISA): 2020 Revision Consultation Draft
CRISA was launched in 2011 to encourage the investment sector to integrate environmental, social and governance (ESG) factors into their investment decisions. In response to global developments, and to ensure its continued relevance, the CRISA Committee has reviewed the CRISA Code and released a draft revised Code for public comment. In addition to our detailed submissions on a number of the provisions of the revised Code, we addressed the CRISA “elephant in the room”:
- When CRISA was first launched in 2011, its objectives were articulated in a very similar manner to the objectives articulated in the revised Code. At that time, South Africa was considered a global leader in corporate governance and responsible investing. A decade later, the South African investment sector has fallen far behind global best practice in relation to tackling key ESG challenges; including climate change, inequality, excessive executive remuneration, racial and gender discrimination, tax evasion, and pay gap disclosure.
- The key questions to ask in relation to the revised CRISA Code are, therefore, why will things be different this time? How will the revised Code spur the kind of action that the original CRISA Code was intended to spur? How will those who claim to have adopted the Code be held accountable for applying its principles and practices?
3. National Minimum Wage Commission’s Proposal for Annual Adjustment
In November 2020, the Department of Employment and Labour (DEL) sought public input on the National Minimum Wage Commission (NMWC) proposal for the 2021 annual adjustment of the national minimum wage (NMW). Our response to the proposal focused on the importance, in setting the NMW, of considering whether it contributes to the reduction of wage inequality and income differentials. Our submission included these key points:
- According to StatsSA, “labour market income is overwhelmingly the largest contributor to income inequality when compared to other income sources”. One of the purposes of the NMW Act, 2018 is to “advance economic development and social justice by improving the wages of lowest paid workers and protecting workers from unreasonably low wages”.
- While the majority of NMWC Commissioners argue that “reducing the wage gap requires a real increase in the minimum wage”, the proposal does not reference the information required to be submitted by employers to the DEL in terms of section 27 of the Employment Equity Act, 1988. This information, submitted annually by employers via the recently updated “Form EEA4”, should provide valuable insights into wage gap inequality in South Africa.
- Reducing the wage gap and addressing income inequality requires more than just a focus on increasing the minimum wage, because increases in the salaries of senior executives will always outpace increases in the minimum wage. Without a clear picture of the vertical wage gap – and other wage gaps, such as the gender and race wage gaps – it will be extremely difficult to make real progress on wage inequality in South Africa.
- It is a significant failure of transparency that the Form EEA4 submissions are not publicly available. The original purpose of the Form EEA4, the submission of which has been a legal requirement for nearly ten years, was to allow the Employment Conditions Commission to establish norms and benchmarks for proportionate income differentials. It is truly devastating, in a country as unequal as South Africa, that no such norms and benchmarks have been established, despite the passage of more than a quarter of a century since the end of apartheid.
4. International Financial Reporting Standards (IFRS) Foundation: Consultation Paper on Sustainability Reporting
Recognising the need to simplify and align sustainability disclosures and reporting, the IFRS Foundation released for public comment, in September 2020, a call to assess whether, given the Foundation’s global reach and credibility in the financial reporting arena, the Foundation should use its expertise to develop a sustainability reporting framework designed to achieve “global comparability and consistency for global stakeholders”. In addition to our responses to the specific questions posed in the consultation, Just Share highlighted that:
- The Foundation’s list of relevant stakeholders excluded civil society, labour and affected communities, which is extraordinary, given the key role that these groups have played in driving progress on sustainability-related financial issues. Furthermore, these groups are important users of sustainability reporting, and are very often the subject of such reporting.
- We expressed concern at the Consultation Paper’s classification of climate change as an “environmental issue”. It is essential that the language of sustainability reporting acknowledges that climate change is a human rights issue which will profoundly affect every person on earth, and that the effects of climate change are already impacting the lives and livelihoods of many vulnerable communities across the world.