Element Investment Managers (Element) is committed to the Code for Responsible Investing in South Africa (CRISA). We led a Principles for Responsible Investment (PRI) South Africa Network engagement with the King Committee that led to the King III Report on Governance acknowledging the need for institutional investor responsibilities:
“An ‘apply or explain’ market-based code of good practice in the context of listed companies, such as King III, is stronger if its implementation is overseen by those with a vested interest in the market working, i.e. the institutional investor. Recent experience indicates that market failures in relation to governance are, at least in part, due to an absence of institutional investors.”
Element was invited to serve on the Committee on Responsible Investing by Institutional Investors in South Africa and participated actively to help ensure the launch of the final Code on 19 July 2011. CRISA, comprising 5 Principles, became the second investor code in the world but the first code to require the integration of sustainability or ESG factors.
Principle 1 – An institutional investor should incorporate sustainability considerations, including ESG, into its investment analysis and investment activities as part of the delivery of superior risk-adjusted returns to the ultimate beneficiaries.
Element has a 10 year track record of including sustainability in our investment analysis and decision making. We have one investment philosophy, one investment process and one investment team which supports and facilitates the integration of sustainability or material ESG factors.
Principle 2 – An institutional investor should demonstrate its acceptance of ownership responsibilities in its investment arrangements and investment activities.
Element has developed an engagement capability over a number of years. We engage with companies to improve ESG practices and disclosure. Our engagement activity involves our analysts, portfolio managers and the Chief Investment Officer. We also collaborate with other investors, local and international, on material company and investment policy issues. Engagement is an important investment tool to add value and reduce portfolio risk.
We vote all investee company resolutions and disclose our reason for voting against or abstaining on any resolution. We also disclose full voting records for each quarter and the proxy voting policy that guides our voting.
Controls are in place to prevent insider trading as defined by the Securities Services Act.
Principle 3 – Where appropriate, institutional investors should consider a collaborative approach to promote acceptance and implementation of the principles of CRISA and other codes and standards applicable to institutional investors.
Element works with other shareholders, service providers, regulators, investee companies and ultimate beneficiaries to promote CRISA and sound governance. We have also worked with the Takeover Regulation Panel to develop a collaborative engagement guidance document so that we understand and prevent the negative consequences of acting in concert.
Principle 4 – An institutional investor should recognise the circumstances and relationships that hold a potential for conflicts of interest and should pro-actively manage these when they occur.
Element has a Conflict of Interests Management Policy in place and has established processes to monitor compliance with this policy.
Principle 5 – Institutional investors should be transparent about the content of their policies, how the policies are implemented and how CRISA is applied to enable stakeholders to make informed assessments.
Element publishes our voting record and proxy voting policy on our website, and provide quarterly reporting to our clients on our responsible investment activities. We also publish our approach to ownership responsibilities and the integration of sustainability considerations into our investment analysis.
As per Principle 4, we disclose our policy to identify, prevent and manage conflicts of interest.