Time for the JSE to walk its talk on climate

This article was first published in the Business Day on 6 July 2021.

In its public reports, and at public events, the JSE repeatedly trumpets its “sustainability credentials”. When it comes to action, however, the JSE has not taken even some of the most basic steps required by the many grand global initiatives in which it plays a role.

The JSE has been a signatory to the Principles for Responsible Investment (PRI) since 2009. It is a founding member of the UN Sustainable Stock Exchanges (SSE) Initiative. The JSE co-chairs, with the London Stock Exchange Group (LSEG), the advisory group for two SSE Initiative publications launched on 29 June 2021: a new “Action Plan to Make Markets Climate Resilient” and “Model Guidance on Climate Disclosure”.

The JSE’s CEO, Dr Leila Fourie, is part of the UN Secretary General’s Climate Action Advisory Group. She co-chairs the Global Investors for Sustainable Development Alliance (GISD) of 30 CEOs, who are “committed to drive investment and its impact to scale for the achievement of the [sustainable development goals]”.

The JSE is also part of South Africa’s Financial Sector Climate Risk Forum (FSCRF) and chairs its Sustainable Finance Working Group.

Despite all of this impressive-sounding involvement in world-leading initiatives related to climate change, the JSE’s claims to be a trailblazer in sustainability are not matched by its actions.

In July 2020, the GISD – as part of its report on “Urgent Actions to Harmonise and Scale Sustainable Finance” – recommended mandating sustainability reporting requirements and disclosures, including the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), for financial and non-financial institutions.

The LSEG, the JSE’s co-chair of the SSE Initiative’s Climate Disclosure Advisory Group, already requires premium listed companies to report in terms of the TCFD Recommendations.

The JSE, on the other hand, does not require – or even recommend – that JSE-listed companies report in terms of the TCFD recommendations. It has not aligned its own climate disclosures with these Recommendations, nor has it even signed up to publicly support them.

At the JSE’s 3 June 2021 AGM, Just Share asked the JSE, as we did at the exchange’s 2020 AGM, when it would require its issuers to report in terms of the TCFD Recommendations, and when it would publish environmental, social and governance (ESG) reporting guidance for issuers, as required by the SSE Initiative.

JSE chairperson Nonkululeko Nyembezi’s reply referred to the importance of a “coordinated response”, and to work underway by National Treasury “to fashion a country level response”, and by the International Financial Reporting Standards (IFRS) Foundation “to devise what could be a globally-acceptable IFRS sustainability standard”.

Ms Nyembezi said that the JSE was “too small to lead on this” and that “we believe that it would not be the right thing to do for us to go off ahead of all of these activities having reached a consensus position and mandate something that may turn out to not actually be the right thing and have to turn around and change all of that again”.

Dr Fourie commented that the JSE was “guiding strongly” and playing a “strong, meaningful and leading role on the global stage in shaping climate change and TCFD or other disclosures relating to climate change”. She said that IFRS standards should be expected “imminently”.

However, the IFRS climate disclosure standards will, at the earliest, appear in the middle of next year; if they do at all – the process of standardisation is still a highly contested one. The comment period for Treasury’s Draft Green Finance Taxonomy is still open, and there has been no word on any revision to Treasury’s Draft Technical Paper on Financing a Sustainable Economy, since the comment period closed in the middle of last year.

Waiting for the government to act, or for global standardisation, seem to be simply weak excuses for failing to take action.

In many public fora – and on its website – the JSE also calls itself a leader in emerging markets. It states that it can “have a great impact if we use our voice and platform to influence the sustainability practices of others”. Of the 108 stock exchanges tracked by the SSE Initiative, the JSE is one of the 48 that does not provide written ESG Guidance. Stock exchanges in multiple emerging markets have done so; including in Bangladesh, Botswana, Brazil, China, Chile, Colombia, Kazakhstan, Kuwait, India, Indonesia, Malaysia, Mexico, Nigeria, Turkey and Vietnam. Many emerging market stock exchanges are also supporters of the TCFD: the JSE is not.

It’s time for the JSE to back up its claims of sustainability leadership with some action at home.

Financial markets require clear and comprehensive information on the risks and opportunities of climate change to inform decision-making, and the TCFD Recommendations are globally accepted as the most useful mechanism for disclosure of climate change’s material financial risks.

The Recommendations are over four years old and only 17 South African entities have publicly expressed support for them, despite South Africa being the 12th largest emitter of greenhouse gases, and facing severe risks from global heating. Without regulation, it’s clear that companies will continue to delay and avoid assessing their climate-related risks and opportunities as long as possible. In the interim, our already-small window to prevent the most severe impacts of climate change continues to narrow.

As Just Share has been calling for for at least three years, the JSE should, at a minimum, publicly support the TCFD Recommendations, and recommend that issuers align their reporting with them.  Ideally, it should make TCFD reporting mandatory under the Listings Requirements. At the very least, the JSE should also align its own disclosures with the TCFD Recommendations. Until it does so, its claims to be a sustainability leader will continue to ring hollow.

By Robyn Hugo.

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