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Transcript
Information Briefing: Annual Index Review
Corlile le
Roux, Head of SRI Index
Corli
Roux
April 2011
April 2011
Highlights of Index evolution
Established May 2004
Fundamental principles
 Enable SRI
 Aspirational Benchmark
 Facilitate Debate
Broad sustainability assessment
 Triple bottom line
 Governance
Deliberately developmental
 Focus areas
 Incremental thresholds
Current statistics
2004
Companies
participating
Number of
constituents
Not eligible
Removed at
company request
74
2005
58
2006
62
2007
2008
2009
2010
72
105
109
106
(65
(103
(104
(102
auto)
auto)
auto)
auto)
51
49
58
57
61
67
74
-
1
1
-
1
1
1
-
-
-
-
1
-
-
Performance by market cap
HEADLINE
2004
2005
2006
2007
2008
2009
2010
Top 40
31
32
34
34
36
34
36
Mid Cap
17
13
17
18
23
30
33
Small Cap
3
4
7
5
4
4
5
51
49
58
57
61
68
74
Total
Value proposition
Highlights imperatives of sustainability
 Encourages best practice beyond compliance
 Places local companies on par with international counterparts
 Enhanced reputation
 Enhanced stakeholder engagement
Framework for –
 Risk management
 Comprehensive reporting and disclosure
 Engagement with investors
Recent developments
2007 – New model, international data provider, automatic universe
2008 – GEPF collaboration
2009 – Index moves to real time, Swix Index launched
2010 – Climate change introduced, local research partner, data sales launched
2011 – Higher threshold, environmental best performer level introduced
Eligibility
Base universe: FTSE/JSE All Share Index as at March 2011
Automatic assessment
 2010 SRI Index constituents
 Top 40
 Mid Cap
Voluntary assessment
 Small Cap
Ineligible if excluded from All Share at any time during process or after review
Eligibility (cont.)
Companies with structural complexities:
 Holding and investment holding companies with no staff
o Policies and governance at holding level
o Subsidiary contributing most to revenue
 Property funds
o Basic full assessment
o Where no employees, similar to investment holding companies
Criteria 2011: Outline
Structured along environment, society and governance (ESG)
 Four areas of measurement
o Broad areas: environment, society, governance & related sustainability concerns
o Focus area: climate change
 Within each area: Policy, Management and Reporting
o Policy statements and documents, strategies, undertakings, commitments – ideally publicly
available
o Management and performance: systems, implementation of systems, programs, targets,
objectives, monitoring and measuring of performance
o Reporting and disclosure: content – publicly available from 2012
Criteria 2011: Environment
Impact classification
 High, medium, low
 Activity-based, assessed relative to five key areas: climate change, air pollution,
water pollution, waste and water consumption
Minor amendments to clarify reporting criteria
 Ensure cumulative nature of indicators
 Supporting consistency of research
Criteria 2011: Environment (cont.)
High impact: reporting
 Removing optional coverage criteria
 Text of environmental policy specified
Medium impact: no change
Low impact: reporting
 Text of environmental policy specified rather than description of impacts
Policy and Reporting: Definition of “whole group” wrt coverage: >95%
Criteria 2011: Society
No changes from 2010 criteria
Thematic approach
Core and desirable indicators
BEE
 Only companies with South African operations
HIV/Aids
 Only companies operating in high risk countries (including South Africa)
Criteria 2011: Governance
No changes from 2010 criteria
Thematic approach
Core and desirable indicators
Criteria 2011: Climate Change
Principles
 Incremental
 Risk assessment and management
 No impact classification
Minor changes from 2010 criteria
 Policy: Senior responsibility and Public commitment, Policy context (new)
 Management: Any targets / goals
 Reporting: Emissions disclosure, Scope, Methodology, Trend data (new)
Entry level threshold: Environment
Varies according to impact level, coverage and number of indicators met
Policy statement required to be public
Addressing all key areas
Distinguish between quantified and documented targets
Entry level threshold: Society
Majority of all indicators – half plus one
1/3 of indicators met must be core
One core from each of BEE and HIV/Aids (where applicable)
Entry level threshold: Governance
Majority of all indicators – half plus one
1/3 of indicators met must be core
Entry level threshold: Climate Change
Three indicators
 Senior responsibility (portfolio specifically includes climate change mandate)
 Public commitment to manage climate change impacts
 Emissions disclosure (absolute or normalised) – public CDP submissions accepted
Best performer (BP) level
Meets
 BP level in Environment
 All core indicators in
o Society
o Governance and related sustainability concerns, including independent chair
 All climate change indicators, except for trend data
BP level: Environment
Meet one or more of policy, management or reporting
Impact
HIGH
Policy
5 core plus 3 desirable
(including ‘moves to
environmental sustainability’)
Policy publicly available, cover
whole group plus
MEDIUM
LOW
 All 5 core plus at least 1
desirable
OR
 4 core plus 2 desirable
Cover whole group plus 4
indicators, 3 of which core
Management Systems
Reporting
6 indicators, (including quantitative
objectives/targets); OR
ISO14001 OR EMAS registered.
4 core plus independent
verification and 3 other
desirable
Depending on EMS coverage:
 6 indicators (including quantified
targets) OR 5 indicators (including
documented objectives and targets
in all key areas); OR
 ISO certification or EMAS
registration considered to meet all
Cover whole group including
text of policy plus 1 more core
and 1 desirable
Depending on EMS coverage, 4 or 6
indicators;
ISO certification or EMAS registration
are considered to meet all.
Cover whole group including
text of environmental policy
plus 1 other
Process: Timeline overview
Review comprises second half of the year
Phase 1: EIRIS/USB review of public information – commences on 16 May
Profile mailing to companies between July and August
Phase 2: companies have three weeks to respond (EIRIS considers extensions on merit)
JSE conducts controversial engagements during September
EIRIS/USB incorporates feedback and perform QA during October
JSE conducts borderline engagements early November
Advisory Committee meets mid-November
Results announced end November
Process: Phase 1
Review of public information

Most recently available

Web sites, annual reports, etc.
Preliminary company profile compiled

General overview of business

Environmental impact classification

Assessment of public data against criteria
Profiles mailed to companies

Tranche 1: Monday 4 July

Tranche 2: Monday 25 July

Tranche 3: Monday 15 August
Process: Phase 2
Company response to preliminary profile
 Respond directly on profile
o Where reporting advanced, most indicators met
o Mark up changes
o Provide evidence
 Complete survey questionnaire in full or in part
o Where unsure of which information required to meet
o To extent necessary to meet ‘not met’ areas, or to improve ‘met’ areas by providing detail /
context
Process: Phase 2 (cont.)
Attach evidence
Return to original researcher
Final profiles sent with company results shortly before announcement
Borderline companies (BL)
Companies meeting most areas, failing marginally in one
Process:

JSE engages with BL company on specific area
o Three working days to respond
o JSE considers with Advisory Subcommittee
o JSE decides whether in / out
Repeat borderline issues

Number of times for BL limited by Ground Rules

Must show commitment to improve after second BL status

If not improvement by third BL status, excluded until additional criteria met
Controversial stories
Covers two elements
 EIRIS news search covering specific areas
o Environmental violations, health & safety issues, major competition incidents, human rights
violations, etc.
 Stakeholder complaints
JSE filters for engagement
Engages with company on particular issue
 Engagement will happen during course of review
 Company has seven working days to respond
 If excluded, re-entry criteria set
Final results to companies
Cover letter
 Indicates individual company result and salient matters, e.g. relevant controversial
stories that were considered
Summary sheet
 Indicates overall performance in relation to each area of measurement
Final profile
Publication of results
Public announcement
Media pack
 Press release
 Constituents
 Best performers and consistent Best Performers
Data sales approach for 2011
Companies will be asked to opt in
Opt in companies to comment during Phase 2 on publication of confidential
information
Developments for 2012
Finalise approach to holding, investment holding and property investment
companies
 May require engagement with relevant companies
Reporting criteria
 From 2012, all reporting criteria must be found in public domain
Contact details
• JSE
– [email protected]
– Corli le Roux +27 11 520 7104
– Makhiba Mollo +27 11 520 7022
• EIRIS
– [email protected]
– Charlotte Hine – Project Leader