Environmental, social, and governance (ESG) considerations have become increasingly important for organisations globally, including financial institutions in South Africa. ESG disclosure helps stakeholders understand how companies manage ESG risks and opportunities and how they perform against ESG criteria. As regulatory frameworks continue to evolve, financial institutions must stay informed about current and upcoming disclosure requirements.
Why ESG matters
All organisations impact the environment and society while also being affected by environmental and societal factors that influence business performance. Stakeholders increasingly expect transparency on non-financial parameters affecting company operations, and ESG disclosure serves as the primary vehicle for communicating this information.
Sustainability reporting and climate change reporting are important subsets of ESG disclosure. While mandatory disclosure requirements are already in force in jurisdictions such as the European Union and United Kingdom, South Africa has been developing its own framework through voluntary guidance and regulatory initiatives.
South African ESG developments
JSE disclosure guidance
In 2022, the Johannesburg Stock Exchange (JSE) released its
Sustainability Disclosure Guidance and Climate Change Disclosure Guidance to promote transparency and good governance among listed companies. The JSE is currently reviewing this guidance to align with the International Sustainability Standards Board's (ISSB) IFRS S1 and IFRS S2 standards, published in June 2023.
Companies and Intellectual Property Commission (CIPC)
In October 2024, the CIPC updated its framework by adding a sustainability disclosures module to the XBRL taxonomy. This update aligns with the ISSB's IFRS S1 and S2 standards and encourages voluntary ESG data reporting.
On 31 January 2025, the CIPC published Notice 6 of 2025 regarding public consultations on implementing mandatory sustainability reporting obligations. The Department of Trade, Industry and Competition (DTIC) and the CIPC have established a steering committee to oversee a regulatory impact assessment on adopting the ISSB standards in South Africa.
Financial Sector Conduct Authority (FSCA) initiatives
In May 2023, the FSCA published its Introductory Statement on Sustainable Finance and Programme of Work to foster a fair, efficient, and resilient financial system that supports inclusive and sustainable economic growth. The FSCA aims to enable capital flows that support sustainability objectives; facilitate due diligence; adapt international ESG frameworks; and empower retail consumers.
2025 Sustainable Finance Update Report
In March 2025, the FSCA published its Sustainable Finance Update Report, outlining progress under its sustainable finance programme. The report aligns with South Africa's G20 Presidency priorities, which include:
- Strengthening the global sustainable finance architecture.
- Scaling up adaptation finance for a just climate transition.
- Unlocking the financing potential of carbon markets.
The FSCA's strategy is structured around five key pillars:
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Taxonomy: Developing common terminology and understanding, building on outputs from National Treasury's Climate Risk Forum.
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Disclosure, reporting and assurance: Aligning corporate disclosure and financial reporting requirements while helping consumers assess sustainability products.
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Market development: Supporting the development of sustainable finance markets, including carbon markets.
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Active ownership: Encouraging institutional investors to drive positive sustainable outcomes.
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Financial education: Empowering retail investors through financial literacy to understand the risks and benefits of ESG-aligned products.
We have written a more detailed breakdown on the FSCA's sustainable finance programme which can be accessed here [Part 2].
Prudential Authority guidance
The Prudential Authority has issued guidance notes on climate-related governance and risk practices for insurers and banks, emphasising that:
- Insurers and banks need to incorporate climate-related risks into their established risk and corporate governance framework.
- Climate-related risks go beyond reputational concerns and require holistic treatment.
- These risks must be adequately accounted for in board-approved risk management frameworks.
The Authority has also issued guidance on climate-related disclosures covering governance, strategy, risk management, and metrics and targets.
Evolving director duties
South Africa has joined a global panel of legal counsel issuing opinions on directors' duties and liability for climate-related risks.
In September 2024, a legal opinion was issued on behalf of the Centre for Environmental Rights and the Institute of Directors in South Africa (IoDSA) addressing directors' accountability under the Companies Act, 2008; the common law; other relevant legislation; and good governance standards, including the King IV Report on Corporate Governance, 2016, and its Guidance Paper on Climate Change, 2021.
The opinion considers the legal bias on which directors may be held liable for failing to address, disclose, or prepare adequately for climate risks affecting the company's business.
As ESG disclosure requirements continue to evolve in South Africa, and as the ESG-related disputes increasingly include sustainability disclosure-related stakeholder actions, financial institutions must prioritise transparency, accuracy, and fairness in their ESG reporting. Doing so will mitigate greenwashing risks and enable informed decision-making by consumers and investors.
The FSCA will continue to publish annual updates on its sustainable finance programme. Upcoming initiatives include finalising the GFT pilot, issuing guidance notices, and introducing mandatory corporate sustainability disclosure requirements.
Financial institutions should begin preparing now by strengthening internal ESG governance structures; enhancing sustainability reporting capabilities; and ensuring alignment with international standards such as IFRS S1 and S2.
Read Part 2:
Strengthening South Africa’s sustainable finance framework.
