FSCA Statement on Sustainable Finance and Programme of Work

Responsible organisations worldwide are adapting their activities and operations to ensure they are not harmful to future generations, and that they meaningfully contribute to positive economic, environmental, and social outcomes, including the United Nation’s Sustainable Development Goals (SDGs). In line with national and international climate commitments, the FSCA has committed to contributing towards the country’s goal of being carbon neutral by 2050. As a financial sector conduct regulator, it is also committed to playing a transformational role in ensuring that South Africa’s financial system supports the country’s climate and broader sustainability goals. 

FSCA’s response to sustainability takes two positions: 

• As an Authority, the aim is to lead by example. We have adopted sustainability as part of our values. This means we are intentional in ensuring that sustainability is entrenched in our business operations and translated into behaviour that will shape our organisational culture. We adopt socially responsible practices to ensure that we can meet our present needs without compromising the ability of future generations to meet theirs. 

• As a market conduct regulator, one of the FSCA’s strategic objectives is to promote the development of an innovative, inclusive, and sustainable financial system. The Authority seeks to play a transformational role in ensuring that South Africa’s financial system supports the country’s sustainability goals through our customer protection and market integrity mandates. 

To best support a sustainable financial system, the FSCA will evaluate its regulatory and supervisory frameworks to ensure that they enable the effective spreading of financial risks and opportunities from sustainability, so that these are integrated into mainstream financial decision making in a way that promotes investor confidence and customer trust.

Some of the sustainability outcomes that the FSCA will seek to achieve in the financial sector from a conduct perspective include:

• Enabling and promoting capital flows in support of sustainability objectives.
• Making it easier for market players to conduct due diligence by assessing risks and opportunities accurately in order to make suitable sustainability investments.
• Evaluating and adapting appropriate international frameworks related to ESG and climate
• Empowering retail consumers to navigate the sustainable finance market effectively and safely.

Informed by its conduct mandate, the FSCA has developed a Programme of Work for sustainable finance consisting of five pillars.

• Pillar One: Taxonomy: A common taxonomy will contribute towards ensuring common terminology and understanding. Work on this pillar will build on outputs already produced through the National Treasury’s Climate Risk Forum. 
• Pillar Two: Disclosure, reporting and assurance: This includes contributing towards alignment of corporate disclosure and financial reporting requirements, as well as helping ordinary financial customers to assess sustainability products and trust that they are getting accurate and fair information. 
• Pillar Three: Market development: The FSCA will consider the role it can play in developing markets that support sustainable finance on both the supply and demand side. For example, developing marketable securities for retirement funds and collective investment schemes, and building markets for trading carbon credits. 
• Pillar Four: Active ownership: Encouraging shareholders, especially large institutional investors, to use their influence to drive positive change in companies that they are invested in, towards more sustainable outcomes. 
• Pillar five: Empowering retail investors and consumers through financial education to understand the risks and benefits of financial products on offer, in particular to reduce the risk of greenwashing and impact-washing.

Each pillar will be informed and supported by building capacity and capability within the FSCA around sustainable finance; undergoing research and driving stakeholder engagements to support the development of each pillar; regulatory and supervisory framework development, where suitable; and coordination and cooperation with public, private, and civic society stakeholders. Indicative timelines relating to the FSCA’s proposed Programme of Work are subject to further development. Public workshops and stakeholder engagements will be held over the coming months to better understand stakeholder perspectives on the topics and proposed timelines. An immediate output will include a final Sustainable Finance Roadmap, to be published later this year.