The JSE is reviewing its Sustainability Disclosure Guidance in line with the finalised IFRS S1 and IFRS S2 standards from the International Sustainability Standards Board (ISSB) and the recently enacted Companies Amendment Bills.
The JSE guidance, issued in June 2022, was designed to support companies in preparing annual integrated reports, sustainability/ESG reports, and financial statements, helping them to navigate the complex landscape of reporting standards. It aligns with key global frameworks, including the IFRS Exposure Drafts on Sustainability-related Financial Information (IFRS S1) and Climate-related Disclosures (IFRS S2), the Value Reporting Foundation’s Integrated Reporting Framework, the GRI Sustainability Reporting Standards, and the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations.
These initiatives inform corporate disclosure across three main areas: sustainability or ESG-specific reports (for example, climate change or human rights), integrated reports focused on value creation, and financial statements reflecting the monetary impacts of sustainability issues.
The final versions of the IFRS S1 and IFRS S2 standards, issued in June 2023, brought some notable changes compared to the initial drafts. According to an analysis by Ecometrica and the IFRS Foundation, key differences included:
Scope 3 emissions exemption
In the finalised version of IFRS S2, companies are granted a transition period in the first year of adoption, during which they are exempt from disclosing Scope 3 greenhouse gas emissions. This change was introduced in response to feedback about the complexity and challenges of obtaining reliable Scope 3 data.
Consolidation of frameworks
The standards incorporated various existing sustainability frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD), the Sustainability Accounting Standards Board (SASB), and the Climate Disclosure Standards Board (CDSB). This move was aimed at creating a global baseline for sustainability reporting, reducing the burden on companies that previously had to report under multiple frameworks.
Flexibility for jurisdictional requirements
IFRS S1 and S2 were designed to be interoperable with existing standards such as the Global Reporting Initiative (GRI). They also allow room for additional jurisdiction-specific disclosures, making it easier for companies to comply with global and local regulatory requirements.
Longer transition timeline
To ease implementation, the final versions allow more time for companies to adjust to the new reporting requirements, particularly with respect to climate-related data and sustainability metrics.
In an interview with journalist Alishia Seckam during the latest PSG Think Big webinar, JSE’s chief executive Dr Leila Fourie said when the JSE released the guidance, the IFRS S1 and IFRS S2 standards were in draft form.
“The IFRS standards are increasingly becoming the dominant international framework, and they also include quite a number of important changes to the draft versions. And so, our review process is really taking account of the S1 and S2 changes that we saw, as well as, where relevant, any recent developments. For example, the Taskforce on Nature-related Financial Disclosures (TNFD) and the GRI Biodiversity Standard are also being contemplated,” she said.
On 26 July, President Cyril Ramaphosa signed the long-awaited First and Second Companies Amendment Bills into law.
One of the most notable areas of amendment involves remuneration, which has been the subject of intense debate and numerous comments in recent years.
These amendments are critical for boards of directors and remuneration committees (Remcos), but they also have significant implications for boards of trustees. As stewards of capital under Regulation 28, trustees must consider environmental, social, and governance (ESG) factors in their decision-making. Several amendments focus on ESG elements, including those related to remuneration and social and ethics committees (SECs).
Read: Why retirement fund trustees should pay attention to the newly signed Companies Amendment Bills
Fourie noted the number of changes, “for example, the pay gap metrics that are now required”.
“So work is still under way, and we will align to ensure that any of the output that we create is considered in terms of what’s happening in our broader regulatory sphere, and we are aware that the Companies Act … there is discussion around the mandating of such standards in the Companies Act. However, we will wait to see how that unfolds,” she said.
Response to emerging trends
Discussing the JSE’s response to emerging trends such as digitisation, digital assets, data, and ESG sustainability criteria, Fourie stated, “We’ve been very responsive to all of these trends, and they are important trends that will shift and reshape our markets.”
She highlighted the JSE’s proof of concept for a tokenised market, developed in collaboration with the South African Reserve Bank and major banks.
“We are now engaging market participants on what could look like phase two of that.”
Regarding sustainability, she pointed out that “our green social sustainability bonds have all been doubled year on year for the last few years”.
The JSE has also launched a private placements market for small and mid-cap companies focused on environmental and infrastructure projects.
On data initiatives, Fourie remarked, “We see that as a growth initiative, and we’ve invested in our basic infrastructure,” noting the double-digit growth in these areas.
She also underscored the JSE’s strategy to diversify revenue sources: “What we’re doing is to try to diversify our revenue sources and protect ourselves against the cyclicality of the trading environment.”
This approach, she said, aims to stabilise revenue and reduce fixed costs while maintaining a strong focus on the JSE’s core operations.
Top priorities over the next five years
In outlining the JSE’s priorities for the next five years, Fourie said, “It’s important for us to remain responsive to our existing constituents. We have deep, liquid capital markets. We are starting to see green shoots, and we want to ensure that we remain relevant.”
She emphasised the importance of foundational elements, stating, “We want to make sure that the basics, the hygiene factors, our systems, resilience, all of the investment into cyber protection are there.” She added that this focus on security and operational integrity is paramount.
Looking ahead, Fourie said the JSE plans to undertake significant initiatives, including a partnership with Amazon Web Services to upgrade its back-office system, which she noted “will reduce costs to market participants”.
The exchange is also revamping its data regime to enhance product monetisation and is actively scanning for “inorganic growth opportunities” to diversify revenue streams.
“We’re looking at making sure that we protect and grow our core, and that we are responsive and transform in new areas of development that we’re seeing markets taking,” she said.
