Regulation 28 (Reg 28) under the Pension Funds Act aims to ensure that the savings South Africans contribute towards their retirement is invested in a prudent manner that not only protects the retirement fund member but is also channeled in ways that achieve economic development and growth.
Reg 28 promotes responsible investing of fund assets, based on a sustainable, long-term, risk aligned and liability-driven investment philosophy. Prudent investing should consider factors which affect the sustainable long-term performance of a fund’s assets, including environmental, social and governance risk factors.
The Financial Sector Conduct Authority (FSCA) recently published FSCA Communication 1 of 2019 (PFA) together with a Guidance Notice on Sustainability of Investments and Assets in the context of a retirement fund’s investment policy statement. The Guidance Notice provides guidance on some of the essential aspects of sustainable investments that the FSCA expects a fund to include in its investment policy statement. The Guidance Notice also sets out the FSCA’s expectations regarding certain disclosure and reporting requirements relating to sustainability.
FSPs that have been appointed by a fund to manage assets, in terms of a discretionary mandate, and FSPs that provide advice to clients relating to retirement, would be well advised to ensure that they understand the requirements and principles set out in Reg 28, and this Communication and Guidance Notice.