Institute of Retirement Funds Africa
PENSION and provident funds are the custodians of the retirement savings of employed South Africans and, as one of the largest investors in the South African economy, they have a responsibility to contribute to the transformation of society.
This places strong pressure on a fund’s board of trustees. Many question what they should be doing to further drive transformation and how they should monitor their progress in achieving this.
Malusi Ndlovu, Head of Old Mutual Corporate Consultants (OMCC), says for boards of trustees to act as good corporate citizens, their pension and provident funds need to embrace the philosophy and principles of transformation.
He cautions however, “The manner in which they understand and apply these principles will differ from fund to fund, as such trustees should ensure that they adopt the approach which best meets their beliefs and those of their members.”
He goes on to say that the aspects of transformation that OMCC encourages their clients to consider within their fund structure includes (but are not limited to):
Embedding Broad-Based Black Economic Empowerment (B-BBEE) in their fund’s procurement policy;
Developing investment strategies which also target sustainable social, environmental and governance outcomes and that enhance the outlook for long term economic growth for in isolation, since all the aspects when viewed holistically, can have a broader societal impact.”
When considering individual aspects, funds should also debate and decide what they are hoping to achieve. He raises an example: “Is ownership by one or two individuals contributing as much to transformation as ownership which is broad-based?
“There is not necessarily a wrong or right answer to this type of question, but it is important for trustees to be aligned in their views, particularly if they are using such factors as a significant criteria for a supplier’s appointment.” Responsible Investing
Responsible investing, which encompasses the corporate activities necessary for sustainable corporate citizenship, can also be an important contributor to transformation.
Trustees need to decide if they support the Code for Responsible Investing in South Africa (CRISA), and if they do, it is important that their involvement does not end with this decision i.e. to comply with the code they need to continually engage with their investment managers to ensure that their actions are in line with their promises. Targeted Investments
Ndlovu explains that the third aspect which OMCC thinks is important, is that of ‘targeted development investments’. If selected correctly, these can provide funds with strong, diversified returns whilst having a direct and visible societal impact.