The rationale behind responsible investment

Social responsible investment, decent work and pension funds 27

4.5. Government Employees Pension Fund Republic of South Africa

Established in 1996 after the consolidation of various public sector funds, the Government Employees Pension Fund GEPF is a defined benefit pension fund with a core business of managing and administering pensions and other benefits for government employees in South Africa. 29 With more than 1.2 million active members, around 318,000 pensioners and beneficiaries, and assets worth R1 trillion, the GEPF is Africa’s largest pension fund.

4.5.1. The rationale behind responsible investment

The GEPF states that its mission is to improve the financial security of government employees and pensioners and to effectively manage and invest member assets in order to meet current and future liabilities. As part of this mission and of particular importance to SRI, the GEPF believes that implementing a strategy to ensure the integration of ESG issues in investment decisions and ownership practices, can improve its ability to achieve its objectives. The Fund considers the following ESG issues to be particularly important in the South African investment context: Transformation and Broad-Based Black Economic Empowerment B-BBEE opportunities and challenges; Energy security risks; Water security risks; HIV and AIDS; Human capital and skills development management. It is also of the opinion that a lack of management of ESG issues can cause securities and other assets to lose value. By this token, an appropriate approach to managing ESG issues can enhance value and provide competitive advantage. As an investor, the GEPF believes that the integration of ESG issues in investment decisions can help to create more ethical companies. The GEPF’s investments have four characteristics that make them particularly sensitive to ESG issues: the Fund is a long-term investor; its investments are broadly diversified; the majority of the portfolio’s components are managed through a passive investment strategy; and the portfolio’s size requires a responsibility to consider its actions and their consequences carefully. The Fund also feels that it has a responsibility to signal concerns and encourage change in ESG-related areas. In order to do so, the Fund can exercise its ownership rights, as it has the leverage to communicate with and influence the companies in which it invests. Finally, the GEPF believes it has a role to play in addressing some of South Africa’s pressing socioeconomic challenges, namely poverty, extreme economic inequality and the need for further B-BBEE. The GEPF feels that its participation in addressing these challenges will be beneficial for the economic and social health of South Africa. 29 Information provided below comes from the GEPF website: http:www.gepf.gov.za 28 Social responsible investment, decent work and pension funds

4.5.2. Responsible investment approach