ESRM Activities To Date

The ESRM Program in South Africa is supporting regulators, financial institutions and broader stakeholders to broaden the application of environmental and social risk management to all relevant financial products by developing disclosure requirements, as well enhancing the environmental and social risk management skills and resources in the market.

Since June 2016, the ESRM program has been supporting the National Treasury to facilitate a Sustainable Finance Working Group and to develop the Financing a Sustainable Economy Policy Discussion Paper, which is expected to recommend the development of mandatory environmental and social risk management disclosure requirements for the sector. 

The Working Group consists of representatives from the financial sector industry association and was conceptualized at a Green Finance Roundtable in June 2016 hosted by the National Treasury. The Working Group has provided technical inputs to the National Treasury on sustainable finance initiatives and challenges in their sector to inform the development of a sustainable finance strategy. The strategy is expected to pave the way for regulatory and industry action on environmental and social risk management disclosures.

Awareness raising event at the South African Reserve Bank in 2017 for Regulators on sustainable finance best practice

The ESRM program delivered a training of trainer’s course throughout 2018 in Johannesburg. The training course was targeted at ESG consultants with the aim of better equipping them to support financial institutions to implement ESG best practice and meet the National Treasury’s future disclosure guidelines.

The ESRM Training of Trainers events in 2018 was attended by environmental and social consultants and financial institution professionals. The focus of the training was on E&S risk management best practice for financial institutions.

In 2019, the ESRM Program has partnered with Rhodes University Business School to offer a short course for professionals on responsible investment and environmental and social risk management for financial institutions. For further details on the course and information on enrollment please see the program brochure.

In response to a request from the banking sector, the ESRM Program team partnered with environmental and social risk management officers from South African banks to develop a best practice guidance document on conducting environmental and social due diligence studies on corporate loans and SME loans.

Environmental and social risks and impacts exist in most business activities and whereas these risks and impacts are obvious in certain sectors or for large-scale activities, it is important that they are not overlooked for small-scale activities or in less risky sectors. Due to an increased awareness in society of the role the banking sector can play in influencing the businesses it finances, environmental and social risk management practices have expanded beyond large project-finance loans. International best practice now requires that banks consider environmental and social risks for all types of clients and transactions. In response to this trend, the document provides guidance to banks on how to assess environmental and socials risks associated corporate loans where the IFC Performance Standards may be applicable and for and all other loans, where the IFC Performance Standards need not be applied. 

Environmental and Social Due Diligence Guidance Note for Banks.pdf

Representatives from banks meeting to develop the environmental and social due diligence best practice guidance document

In the context of an increased focus by the banking sector in South Africa on the impacts of climate change and the need for sustainable finance, in 2019 the ESRM program is organizing a market level technical assistance program for financial institutions focused on improving environmental and social risk management systems and associated reporting processes.

The objective of the program is to equip financial institutions to implement best practice requirements for E&S risk management into their credit processes. The technical assistance will consist of a diagnostic tool on E&S management systems of participating banks, small clinics with other participating financial institutions and the development of a tailored road map to enhance each bank’s E&S risk management systems.

If your bank is interested in participating in the technical assistance, please contact us for further details.

In 2019, the ESRM program will be expanded to support the private equity and pension funds sector to improve their ESG risk management practices. We are currently engaging with stakeholders in the sector to develop a technical assistance program.

If you would like to learn more about this initiative please contact us.