Interview by Reneilwe Mthelebofu – Communications and Language Services (FSCA)
Sustainable Finance, a term you have sure heard numerous times and one that probably piqued your curiosity. What is it exactly?
Sustainable finance refers to the process of taking environmental, social and governance (ESG) considerations into account when making investment decisions. The focus is on investments that deliver social and environmental benefits alongside economic benefits and the international consensus is that addressing ESG factors is necessary for sustainable development and the achievement of the UN sustainable development goals (SDGs).
It follows that regulators such as the FSCA are called to fine-tune strategies to ensure that financial institutions incorporate ESG factors in their investment decisions. We recently caught up with Chwayita Mtebele, Head of the Investment Providers department to talk about sustainable finance and explain how the Investment Providers Industry Survey fits into this context.
1. Chwayita Mtebele, please tell us a little bit about yourself and your journey in regulation:
I am a qualified Chartered Accountant CA (SA) with CTA from UNISA and a BCom Accounting from the University of Fort-Hare; a foundation that gave me a good understanding of accounting, tax, auditing, regulatory environment and compliance functions. I have also just completed the GIBS Global Executive Development Programme.
I have over 10 years’ managerial experience in auditing environment and exposure to financial services, having previously worked as a senior manager attending to the compliance portfolio at an asset management firm and later as manager in the Collective Investment Schemes department at the FSCA responsible for the sound governance, risk management and compliance environment within the CIS industry.
2. You are currently the Head of the Investment Providers department. What is the specialised role of the department within the broader FSCA mandate?
The department supervises the conduct of a range of financial institutions authorised for various investment related activities such as collective investment schemes, asset managers and hedge funds.
3. Tell us more about sustainable finance and why it is important?
Until recently, financial institutions were solely focused on making profit. However, over time their priorities have had to change when allocating capital or making investment decisions, such that they now have to consider environmental factors such as the conservation of nature, protection of biodiversity and other social issues like inequality, human rights, inclusivity, investments to develop communities and other aspects of governance (management structures, employee relations and executive remuneration).
Sustainable finance has become pertinent because of the need to mitigate climate risk. Many financial investors are looking for opportunities of investment that consider ESG factors. This has meant businesses now have to set and more importantly meet sustainability goals.
As a market conduct regulator, one of our strategic objectives is to promote the development of an innovative, inclusive, and sustainable financial system. We seek to play a transformational role in ensuring that South Africa’s financial system best supports the country’s sustainability goals, through our customer protection and market integrity mandates.
4. Why was it important to facilitate the Investment Providers Industry Survey?
The financial services industry is undergoing a paradigm shift towards sustainable finance investing and ESG considerations. As the FSCA, our aim is to promote the development of an innovative, inclusive and sustainable financial system in line with our Statement on Sustainable Finance and Programme of Work Paper, issued in May 2023.
So, the Investment Providers department decided to conduct a survey to assess the readiness of investment providers in integrating sustainable finance investing and ESG considerations into their investment strategies. Investment providers include the following:
- Financial Service Providers (category II, category IIA and category III FSPs) approved in terms of the Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act).
- Managers authorised in terms of Collective Investment Schemes Control Act of 2007 (CISCA) to administer a collective investment scheme, excluding Participation Bonds and Property Schemes.
5. What does the department aim to achieve with the survey?
The survey aims to gather information on the steps taken by investment providers to incorporate ESG factors into their decision-making processes, the tools and resources utilised to assess ESG risks and opportunities, and the extent to which they engage with investee companies on ESG considerations, methodologies, issued score and risk assessments. By conducting this survey, we hope to gain insights into the current state of the industry and identify areas for improvement. We aim to promote more sustainable and responsible investment practices after the FSCA finalises its Sustainable Finance and Investment Roadmap.
6. What is the next step after receiving submissions from the industry?
We will compile a report of the main findings of the survey to outline potential risks and opportunities related to sustainability in investment decisions and identify actionable recommendations. The goal is to provide a comprehensive and informative overview that guides strategic decision-making related to sustainable finance.
The department together with the Policy Support department has proposed industry engagements with ASISA, SAVCA, FPI and their members to discuss the FSCA’s sustainable finance paper, and to hear about their work on the same topic. This will enable the FSCA and the industry to share knowledge on sustainable finance, as well as develop collaborative initiatives aimed at increasing industry awareness and the implementation of sustainable finance practices.
7. When will the report be available for public reading?
We anticipate finalising this before end of March 2024. |
