2.1.1. What are the legislative requirements for companies in relation to sustainability reporting?

ESG laws in Germany mostly originate from EU regulations. As per the European Green Deal, the European Commission aims to achieve climate neutrality in the European Union by 2050 (European Commission, 2019). ESG reporting consists of three interconnected regulations: the EU Taxonomy, Non-Financial Reporting Directive (NFRD)/Corporate Sustainable Reporting Directive (CSRD) and EU Sustainable Finance Disclosure Regulation (SFDR) (Casado Baral, Reference Casado Baral2023; Ipsen et al., Reference Ipsen, Röh and Schrader2024).

The EU Taxonomy entered into force in July 2020. EU Taxonomy is a classification system, which aims to have a common language to classify which economic activities can be considered as economically sustainable. An economic activity can be considered as sustainable or taxonomy-eligible, if it contributes significantly to one of the six defined environmental objectives:

• Mitigation of climate change

• Adaptation of climate chance

• Sustainable use and protection of water and marine resources

• Transition to the circular economy

• Pollution prevention and control

• Protection and restoration of biodiversity and ecosystems

and does no harm to other environmental objectives and safeguards social issues (European Commission, 2024).

The purpose of the regulation is to protect market participants from greenwashing and to help investors to make informed sustainable decisions about their investments. NFRD mandates companies to publish a non-financial report on environmental, employee and social issues. The reports should also cover what portion of the revenue and capital expenditure/operating expenditure can be considered as environmentally sustainable.

NFRD was officially replaced by the CSRD in January 2023. Member states have eighteen months to transpose the directive into their national law. As per CSRD, listed large companies, banks, and insurance undertakings with more than 500 employees are obliged to publish a non-financial statement containing information about “environmental, social and employee matters, respect for human rights, anti-corruption, and bribery matters, including policies in relation to ESG and implemented due diligence process”. The report shall serve the purpose of “double materiality”; that is, undertakings shall not only report how they are affected by sustainability risks but also the possible adverse impact arising from their activities and how the entity manages those risks. In case of non-compliance, entities must explain the reasons for not doing so (Casado Baral, Reference Casado Baral2023).

Additionally, another regulation is the SFRD, effective from 2021 on a “comply or explain” basis, which mandates that financial market participants and financial advisors disclose how they are integrating sustainability into their core business risks and how they allow sustainability into their investment process. Under the SFRD framework, EU Regulatory Technical Standards (RTS), effective from January 2023, provide more detailed quantitative guidelines for reporting (Casado Baral, Reference Casado Baral2023).

Germany has the Corporate Due Diligence Obligations in Supply Chains Act, effective from January 2023 (Federal Ministry of Labour and Social Affairs, 2024). The act regulates the responsibilities of companies with a certain number of employees on human rights and environmental protection on the global supply chain. The obligations of companies to safeguard human rights and protect the environment do not end at their own premises but rather apply to their entire global supply chain. The responsibilities include: protection against child labour, forced labour and discrimination; occupational health and safety; protection against land grabbing; right to fair wages; right to form unions; and protection against environmental violations. Companies must identify, assess, and prioritise the above-mentioned risks, publish a policy statement, and take preventative measures to minimise those risks. Non-compliance will result in an administrative fines up to eight million euros or 2% of global revenue (Federal Ministry of Labour and Social Affairs, 2024).

2.1.2. Do these requirements apply to retirement funds and are there additional voluntary reporting requirements for retirement funds?

EU SFRD and RTS are applicable to all pension funds (Pensionskassen and Pensionsfonds) (Bundesanstalt für Finanzdienstleistungsaufsicht, 2023). Although not legally binding, many funds are signatories of global initiatives such as the Principles for Responsible Investment (PRI), the TCFD, the TNFD or the Say on Climate initiative.

2.1.3. On what aspects of sustainability (environment, social or governance) do the metrics, either voluntary or mandatory, focus on?

The reporting requirements mostly focus on environmental issues. Other than that, the Act on Corporate Due Diligence Obligations in Supply Chains focuses on social issues such as human rights or fair wages (Federal Ministry of Labour and Social Affairs, 2024).

2.1.4. Are there any planned future changes to the reporting requirements?

Germany is on its way to implementing CSRD into national law. The German Federal Ministry of Justice has published the first draft on the German implementation of CSRD on 22 March 2024 (Federal Ministry of Justice, 2024). The EU parliament approved the Corporate Sustainable Due Diligence Directive (CSDDD) on 24 April 2024. Member states have a timeframe of 2024–2027 to transpose the directive into national law. According to the directive, companies with more than 1,000 employees and global revenue more than €450 million will have to “follow a thorough due diligence process to identify, mitigate, and prevent any negative impacts of their economic activities on human rights and the environment. The directive will also enhance the accountability in governance, as management and supervisory boards of the large companies will be held accountable for their decisions on sustainability matter. The directive also mandates companies to make transition plans to align their business to reach the goal of limiting global warming to 1.5°C” (Ipsen et al., Reference Ipsen, Röh and Schrader2024).

2.2.1. What are the legislative requirements for companies in relation to sustainability reporting?

Numerous legislations regarding ESG exist under UK law. On the environmental aspect, all companies are subject to the Climate Change Act 2008 (The National Archives, 2008), the Environment Act 2021 (The National Archives, 2021) or the Streamlines Energy and Carbon Reporting (SECR) Guidelines 2018 (The National Archives, 2018). The Climate Change Act 2008, which was amended in 2019, is a legally binding national emissions reduction target, that aims to achieve the ‘Net Zero by 2050’ goal. The Environment Act 2021 presents a framework of regulations on different areas such as air quality, biodiversity, water and waste management (The National Archives, 2021), whereas under SECR companies must disclose information about their greenhouse gas emissions, energy consumption and actions taken by them to increase energy efficiency.

Following the EU directive NFRD 2014, nonfinancial reporting obligations were first implemented in the UK in 2017, which mandates companies to publish information on environmental matters, social issues, employee relations, human rights, anti-bribery, and corruption.

Most importantly, listed companies, asset managers, asset owners and any company with more than 500 employees or turnover more than £500 million are subject to Taskforce for Climate-related Financial Disclosures (“TCFD”) reporting. These entities must disclose information about the governance, strategy, risk management, and metrics and targets they utilise to mitigate climate related risks. On the social aspect, there exist two important laws. One is the Modern Slavery Act of 2015, according to which all entities with annual turnover more than £36 million are mandated to publish a statement regarding their actions to prevent modern slavery and human trafficking in their whole business operations, including their supply chain (The National Archives, 2015). Another law is for preventing gender discrimination. Companies with more 250 employees must report their gender pay gap information annually, as per the regulation in 2017. Governance regulations are based on the Companies Act of 2006 (The National Archives, 2006) or the Corporate Governance Code for listed Companies (Denton et al., Reference Denton, Raymond and Smith2024). The Corporate Governance Code is carried out by companies on a ‘comply or explain’ basis.

2.2.3. Do these requirements apply to retirement funds and are there additional voluntary reporting requirements for retirement funds?

TCFDs are mandatory for pension funds. Retirement funds in the UK are subject to the non-binding UK Stewardship Code of 2020 (Financial Reporting Council, 2019). The code comprises of a set of “comply or explain” principles for asset managers and asset owners. Signatories are expected to take ESG factors into account in their investment decisions (Financial Reporting Council, 2023). Besides this, many larger UK companies are signatories of voluntary ESG initiatives, for example the GRI or UN PRI (Denton et al., Reference Denton, Raymond and Smith2024).

2.2.3. On what aspects of sustainability (environment, social or governance) do the metrics, either voluntary or mandatory, focus on?

They focus on all aspects.

2.2.4. Are there any planned future changes to the reporting requirements?

The Government is working on the implementation of the International Sustainability Standards Board (ISSB) sustainability standards IFRS S1 and IFRS S2 into national law. Most likely to be enacted by 2025, the standards will be known as Sustainability Disclosure Standards and will be obligatory for listed companies. Besides this, the UK is developing its own taxonomy to identify sustainable economic activity in a uniform way (Denton et al., Reference Denton, Raymond and Smith2024).

2.3.1. What are the legislative requirements for companies in relation to sustainability reporting?

There are no mandatory federal ESG reporting requirements in the United States of America. Only the US Securities and Exchange Commission (SEC) requires listed companies to publish information, that is material to investors, including ESG risks. Companies of all sizes are generally encouraged to publish ESG reports on voluntary basis. At the state level, each state could be broadly categorised into two groups based on its stance on ESG matters, thus essentially splitting the argument into: (1) “Pro-ESG” and (2) “Anti-ESG” states.

On one hand, pro-ESG states promote ESG factors in investment and proxy voting decisions. For example, many states have passed requirements to increase the diversity of boards of directors. States such as Colorado, Illinois, Maryland, and Maine have enacted regulations for their pension systems to integrate sustainability. The amendment of the Illinois Sustainability Act, effective from January 2024, for instance, mandates investment managers to provide a description of the process through which the manager integrates sustainability factors into its investment decision making, investment analysis and portfolio construction. The manager shall disclose this information annually to the respective public agency and to the pension fund, for which the manager is acting as a fiduciary (Illinois General Assembly, 2023).

In California, entities whose revenues exceed a certain threshold are mandated to publish climate risk disclosures aligned with the TCFD framework and Scopes 1–3 emissions disclosures. Several other states have climate-related regulations in place regarding emissions targets, resilience strategies, electricity sector policies, and carbon pricing (Lichtenstein et al., Reference Lichtenstein, Littenberg and Haas2023; Silk & Lu, Reference Silk and Lu2024).

At the other end of the spectrum, states such as, Arkansas, Indiana, North Dakota, Texas and West Virginia, among others, have adopted “anti-ESG” legislation, which discourages state pension funds from considering ESG factors in their investment decisions (Lichtenstein et al., Reference Lichtenstein, Littenberg and Haas2023). States such as Kentucky, Oklahoma, Texas and West Virginia have ‘anti-boycott’ laws, which authorise the state treasurer or comptroller to put a financial institution on a restricted list, when said financial institution boycotts fossil fuel or firearms industries. The treasurer or comptroller’s office reviews the statements made by the board or senior executive of a company about sustainability, and the list of signatories of global initiatives such as Climate Action 100 or Net Zero Asset Managers Initiative and sends questionnaires to the targeted companies about their investment process and strategies. Based on that information, the treasurer or comptroller’s office creates a restricted institutions list, which is regularly updated. Once on that list, the restricted financial institution will be prohibited from doing business with the state or being selected to manage state pension assets (Lichtenstein et al., Reference Lichtenstein, Littenberg and Haas2023; Silk & Lu, Reference Silk and Lu2024).

2.3.2. Do these requirements apply to retirement funds and are there additional voluntary reporting requirements for retirement funds?

All pension funds in the United States are regulated by the Employee Retirement Income Security Act (ERISA), 1974. Following a landmark rule by the Department of Labor (DOL) in 2022, ERISA fiduciaries are now ‘permitted’ to consider ESG factors in their investment decisions and to engage in proxy voting. In contrast, before the DOL 2022 rule, plan fiduciaries were only allowed to consider sustainability matters as a ‘tiebreaker’ and mainly focused on risk-return analysis in their investment decisions (Employee Benefits Security Administration, 2022).

No pan-USA specific voluntary reporting requirements exists. But many companies are signatories of global ESG disclosure frameworks such as: GRI, Taskforce on Climate-related Financial Disclosures (TCFD), Taskforce on Nature-related Financial Disclosures (TNFD) etc. (Silk & Lu, Reference Silk and Lu2024).

2.3.3. On what aspects of sustainability (environment, social or governance) do the metrics, either voluntary or mandatory, focus on?

The existing metrics focus on environmental issues.

2.3.4. Are there any planned future changes to the reporting requirements?

Based on the publicly available information, there is no planned change in reporting requirement.

2.4.1. What are the legislative requirements for companies in relation to sustainability reporting?

There are no comprehensive mandatory ESG reporting requirements in Canada. However, there exist several regulations for listed companies on corporate diversity, supply chain management and climate related risks disclosure.

Corporate Diversity Reporting 2020 requires a company to report annually on the diversity of its board and senior management. Corporations are required to report the representation of women, indigenous people, person with disabilities and minorities on their board.

Fighting Against Forced Labor and Child Labor in Supply Chains Act took effect on 1 January 2024. The law focuses on increasing accountability of companies on elimination of child labour, forced labour and human rights violations, not only inside the country but also in their global supply chain. Companies must report annually, explaining how they prevent and reduce these risks (Brightest, 2024).

2.4.2. Do these requirements apply to retirement funds and are there additional voluntary reporting requirements for retirement funds?

Those requirements do not specifically apply to retirement funds. Canada Securities Authority (CSA) issued guidance for ESG related investment disclosure for funds.

2.4.3. What aspects of sustainability (environment, social or governance) do the metrics, either voluntary or mandatory, focus on?

Voluntary disclosures are often focused on the environmental issues such as stewardship or emissions reduction. Mandatory reporting requirement focus on governance and social issues.

2.4.4. Are there any planned future changes to the reporting requirements?

ESG reporting framework is developing in Canada. Based on the interest of the investors and stakeholders on ESG topics, it is expected that more and more regulations will enter into force in the coming years. The Canadian Sustainability Standards Board (CSSB) has recently published the first draft on the proposed Canadian Sustainability Disclosure CSDS1 and CSDS2, aligned with International Sustainability Standards Board (ISSB) S1 and S2 standards. Currently under review, the framework is expected to enter into force for voluntary adaptation by Canadian companies from 2025. ISSB standard S1 focuses on sustainability related financial information disclosure and S2 focuses on climate related disclosure (Girgenti, Reference Girgenti2024).

The regulatory authority of Canadian pension plans, CAPSA, issued a draft guideline in Environmental, Social and Government Considerations in Pension Plan Management in 2022. According to the draft guideline, pension plan administrators will be required to publish information about the ESG considerations in the investment policy (Canadian Association of Pension Supervisory Authorities, 2022).

Furthermore, the Sustainable Finance Action Council (SFAC) of Canada is working on developing Canada’s climate investment taxonomy to define climate-compatible economic activities, like the EU taxonomy regulations.

2.5.1. What are the legislative requirements for companies in relation to sustainability reporting?

There is no mandatory ESG reporting regulation in Japan. However, several existing laws and regulations focus separately on ‘Environmental’, ‘Social’, or ‘Governance’ issues. The Corporate Governance Code, the Act on Equal Opportunity, the Act on Promotion of Measures to cope with Global Warming, and the Climate Change Adaptation Act are among these (Kuribayashi & Toyoda, Reference Kuribayashi and Toyoda2023).

Since April 2022 the Tokyo Stock Exchange has mandated corporations to comply with TCFD recommendations. Hence, listed companies on the Tokyo Stock Exchange need to disclose information about their sustainability initiatives, including consideration for environment, human rights, and workplace safety in a comply or explain manner (Japan Exchange Group, 2021).

2.5.2. Do these requirements apply to retirement funds and are there additional voluntary reporting requirements for retirement funds?

Those requirements do not specifically apply to retirement funds. As per publicly available information, there exist no other voluntary reporting requirements.

2.5.3. On what aspects of sustainability (environment, social or governance) do the metrics, either voluntary or mandatory, focus on?

The reporting focuses on environmental issues.

2.5.4. Are there any planned future changes to the reporting requirements?

Like Canada, ESG reporting framework is also developing in Japan. The Council of Financial Services Agency (FCA) of Japan is currently discussing how to incorporate sustainability disclosures in the securities report.

Compared to other developed countries, Japan lags significantly behind in gender diversity on board and senior management position. According to the Global Board Diversity Tracker 2022–23, the average female representation in Japanese boards is 14%, compared to approximately 36% and 31% for Western Europe and North America (Canada and USA), respectively (Egon Zehnder, 2022). In this context, the government of Japan targets 30% female representation on boards of directors by 2030 and at least one female director on each board by 2025 (Chan & Kobu, Reference Chan and Kobu2023).

2.6.1. What are the legislative requirements for companies in relation to sustainability reporting?

The Swiss Federal Council, in response to the “For responsible companies – to protect people and the environment” initiative of June 2020, introduced a new regulation in the Swiss Code of Obligations, effective from 1st January 2021 (Eidgenössisches Finanzdepartment EFD, 2022a). This regulation mandates transparency in reporting non-financial matters for companies meeting specific criteria, such as public interest, significant employee count, and surpassing certain financial thresholds. It requires annual reporting on environmental, social, labor, human rights, and anti-corruption issues. The report should cover the company’s business operations, strategies, effectiveness assessment, risks management, and key performance indicators (Der Schweizerische Bundesrat, 2021). It must adhere to national language or English, be approved by top management, promptly published electronically, and remain publicly accessible for at least ten years. Violations incur fines as per the Criminal Code (Eidgenössisches Finanzdepartment EFD, 2022b).

Following this, the Swiss Federal Council enacted the Regulation on Reporting on Climate Matters in November 2022, as part of the Sustainable Finance Strategy, providing guidance on climate-related reporting requirements (Der Schweizerische Bundesrat, 2022a). Companies reporting on climate matters are presumed to fulfil their environmental reporting obligations. However, those not reporting on climate matters must demonstrate alternative means of fulfilling their environmental reporting or justify why they are not pursuing a climate-related strategy. Reports must be published electronically in both human-readable and machine-readable formats (Der Schweizerische Bundesrat, 2024).

2.6.2. Do these requirements apply to retirement funds and are there additional voluntary reporting requirements for retirement funds?

Notably, pension funds are not obliged to comply with the above legislative requirements.

In December 2022, the Swiss Pension Fund Association (ASIP) voluntarily published ESG reporting standards for their members (ASIP Schweizerischer Pensionskassenverband, 2022a). According to the Swisscanto pension Study, since 2015 the percentage of pension funds reporting on sustainability has grown from 8% to 37% in 2022 (Swisscanto, 2022).

In its report on ‘Sustainable Finance’ of November 2022, the Federal Council laid the strategic foundation for the federal government’s work in the area of sustainable finance for the years 2022 to 2025, introducing 15 measures to achieve this goal (Der Schweizerische Bundesrat (2022a, 2022c). As a measure of transparency regarding stewardship strategies, it recommends that financial institutions and pension funds work on transparency on their websites; addressing the extent to which their engagement strategies, and exercise of voting rights relate to the sustainability goals that they willingly support, are compatible with the 2050 net zero target (Der Schweizerische Bundesrat, 2022b).

In March 2023, a motion was proposed to integrate Swiss sustainability goals into the Federal Law on Occupational Retirement, making it part of fiduciary duty, but it was rejected in favour of voluntary compliance (Landolt, Reference Landolt2023). The August 2023 report by the Swiss Federal Council evaluated if pension funds’ investment guidelines hinder sustainable investing, stressing the ambiguity of ‘sustainability’ and the importance of considering climate risks in investments (Der Schweizerische Bundesrat, 2023). The report argues that according to a study by the Federal Office for the Environment, the existing laws imply an obligation to consider climate risks in investments, and that additionally, the ESG Reporting Standard for Pension Funds by the ASIP recognises the pension funds’ obligation to consider relevant environmental, social, and governance factors as a fiduciary duty.

The ASIP-developed ESG reporting standards are effective from January 1, 2023, aiming to enhance transparency, accountability, and alignment with sustainability goals in pension fund management practices (ASIP Schweizerischer Pensionskassenverband, 2022a). The standards, which are voluntary, emphasise the fiduciary duty of pension fund management towards sustainable asset management. They encourage transparency and active communication of ESG activities and progress, advocating for the publication of sustainability reports on fund websites. The ASIP’s ESG reporting standards were formulated by a working group comprising representatives from various associations and organisations involved in asset management and sustainable finance.

2.6.3. What aspects of sustainability (environment, social or governance) do the metrics, either voluntary or mandatory, focus on?

The proposed ASIP ESG metrics focus primarily on the environmental dimension, especially climate-related aspects, providing both basic and advanced reporting options. They cover stewardship activities, portfolio composition metrics, and engagement participation. Stewardship metrics include voting rights exercise and engagement activities, while portfolio composition metrics encompass greenhouse gas emissions, exposure to fossil fuels, and energy intensity for different asset classes. Advanced reporting includes additional metrics like investments in companies with net-zero emissions commitments and water consumption. However, recommendations for social and governance metrics are deferred due to the lack of widely accepted measures and questions about measurability, with indicators focusing on specific policy establishment issues (ASIP Schweizerischer Pensionskassenverband, 2022b).

2.6.4. Are there any planned future changes to the reporting requirements?

Since the standard for Reporting is effective from January 1, 2023, for the year 2023, no further changes were announced nor planned at the moment. The first Reports under this standard are to be published in the first half of 2024.

2.7.1. What are the legislative requirements for companies in relation to sustainability reporting?

In South Africa, sustainability reporting by companies is shaped by the South African Constitution. It includes a justiciable Bill of Rights that includes various socio-economic rights as well as the right to a healthy environment, which have informed and continue to inform the development of sustainability and ESG-related regulations in South Africa.

South Africa has a well-developed body of environmental laws at national, provincial, and municipal levels, and is a signatory to various international instruments, including the Paris Agreement.

Broad-Based Black Economic Empowerment (B-BBEE) is a central part of the South African Government’s transformation strategy. It aims to increase the numbers of Black people who manage, own, and control the country’s economy, and decrease racially based income inequalities. The financial sector in South Africa is governed by the Financial Sector Code (FSC), which was gazetted by the Minister of Trade, Industry, and Competition on 1^st December 2017.

Other aspects that shape sustainability activities and reporting include: governance-related legislation and requirements covering corporate structures and management; executive compensation; strategic direction and oversight; compliance; anti-bribery and corruption; and cybersecurity.

South Africa’s National Development Plan (NDP) 2030 is a strategic plan for the future development of the nation. The primary objectives of the NDP are to eliminate poverty and reduce inequality by 2030. The King IV Report on Corporate Governance in South Africa in 2016 provides principles of ESG considerations that companies should consider when conducting business and when publishing annual reports (Institute of Directors South Africa, 2016). Under the current disclosure regime, there is no express obligation (statutory or otherwise) on companies to provide disclosures on ESG matters.

Whilst there are no mandatory sustainability disclosure requirements, listed companies are subject to the Johannesburg Stock Exchange (JSE) general disclosure obligations under the JSE Listings Requirements, which apply to financially material ESG issues. On 14^th June 2022 the JSE issued two documents providing (a) sustainability and (b) climate-related disclosure guidance for use on a voluntary basis.

2.7.2. Do these requirements apply to retirement funds and are there additional voluntary reporting requirements for retirement funds?

Regulation 28 of the Pension Funds Act (1956), requires a pension fund to “consider any factor which may materially affect the sustainable long-term performance of the asset including, but not limited to, those of an [ESG] character” before investing in and while invested in an asset (U.S. Department of State, 2023). While this is a requirement, there are no explicit requirements on how to disclose and report on this aspect.

The Second Code for Responsible Investing in South Africa (CRISA, 2022) builds on the first CRISA Code (2011) and contains five voluntary principles for stewardship and responsible investment as a key component of the South African governance framework. It is applicable to retirement funds on a voluntary basis and the effective date for reporting publicly on its application is 1 February 2023.

The King IV principles apply to retirement funds. The FSCA has gone further and set out guidelines in Circular PF Number 130: ‘Good Governance of Retirement Funds’. This guideline was issued in 2007 and sets out a number of ‘best practice’ principles for the good governance of a retirement fund.

As for how B-BBEE applies to retirement funds, the Amended FSC provides for a ‘Voluntary Dispensation’ for the top 100 retirement funds (including umbrella funds) to report on B-BBEE annually. If sufficient disclosure by pension funds does not materialise, consideration will be given to revising this dispensation.

2.7.3. What aspects of sustainability (environment, social or governance) do the metrics, either voluntary or mandatory, focus on?

For those companies and retirement funds that engage in voluntary sustainability reporting, the focus typically covers the following aspects:

• Environmental – reporting on carbon footprint, energy consumption, waste management, and resource efficiency.

• Social – addressing issues such as employee welfare, community engagement, health and safety standards, and diversity and inclusion. In particular, the B-BBEE requirements are specifically reported on.

• Governance – transparency in management practices, board diversity, anti-corruption measures, and ethical business conduct.

2.7.4. Are there any planned future changes to the reporting requirements?

The Financial Sector Conduct Authority (FSCA) has published a Sustainable Finance Consumer Risk Report and Roadmap 2024 (FSCA, 2024). The roadmap, which has short-term (1–2 years), medium term (2–3 years) and long-term goals (4 years and upwards), includes several key areas of focus:

• South African Green Finance Taxonomy – considerations for developing a classification system for green finance.

• Disclosure, reporting and assurance – corporate disclosure and reporting, product disclosures, and retail disclosures.

• Market development – investment for a just transition.

The FSCA has also recently expressed its intention to initiate reporting guidelines for pension funds in line with the IFRS S1 (general) and S2 (climate) standards, which may be voluntary initially, but may evolve to become mandatory requirements in time.

2.8.1. What are the legislative requirements for companies in relation to sustainability reporting?

In Botswana, sustainability reporting by companies is influenced by both national regulations and broader international guidelines. Botswana has established environmental laws that require companies to conduct Environmental Impact Assessments (EIA) before undertaking major projects. The EIA Act mandates that companies assess the potential environmental impacts of their activities and provide mitigation strategies (Laws of Botswana, 2019).

For companies listed on the Botswana Stock Exchange (BSE), there are specific reporting requirements that may encompass aspects of sustainability. The BSE’s listing requirements include adherence to the Corporate Governance Code, which encourages transparency and accountability, including the disclosure of environmental, social, and governance (ESG) practices (Botswana Stock Exchange).

Botswana’s National Development Plan outlines the country’s strategic direction and priorities, which include sustainable development goals (United Nations Botswana, 2016). Companies, especially those involved in large-scale projects, are expected to align their activities with the national development goals (United Nations in Botswana). Certain sectors, such as mining and tourism, have specific regulatory requirements related to sustainability reporting. For example, the Mining Sector has the Mines and Minerals Act (Botswana Laws, 1999) which requires mining companies to include sustainability practices in their operations, including environmental protection measures and community engagement.

While not always mandated by law, there is an increasing emphasis on Corporate Social Responsibility (CSR) in Botswana. Companies are encouraged to engage in sustainable practices and report on their CSR activities. Lastly, International Guidelines and Frameworks, although not legally binding, are voluntarily adhered to by many companies in Botswana, such as the Global Reporting Initiative (GRI) Standards which provide a comprehensive framework for sustainability reporting and the UN Sustainable Development Goals (SDGs) in which companies align their reporting with the SDGs to demonstrate their commitment to global sustainability efforts.

2.8.2. Do these requirements apply to retirement funds and are there additional voluntary reporting requirements for retirement funds?

In Botswana, retirement funds are regulated by specific legislation that includes provisions related to sustainability reporting and responsible investment.

The primary regulatory body for retirement funds in Botswana is the Non-Bank Financial Institutions Regulatory Authority (NBFIRA). NBFIRA oversees the conduct and operations of retirement funds to ensure they adhere to regulatory standards, including those related to sustainability. NBFIRA issues guidelines and circulars that retirement funds must follow. These guidelines often emphasise the importance of incorporating ESG considerations into investment decisions and reporting. The Retirement Funds Act provides the legal framework for the establishment, management, and regulation of retirement funds in Botswana. This act includes provisions on governance, investment policies, and reporting requirements (Non-Bank Financial Institutions Regulatory Authority).

Retirement funds in Botswana can align with international standards and best practices related to sustainability reporting and responsible investment:

• Principles for Responsible Investment (PRI) – some retirement funds may choose to become signatories to the PRI, committing to incorporate ESG issues into their investment practices and reporting.

• Global Reporting Initiative (GRI) Standards – adoption of GRI standards for sustainability reporting can help retirement funds provide comprehensive disclosures on their ESG performance.

• For retirement funds, adherence to the Corporate Governance Code is crucial. This code encourages transparency, accountability, and the integration of sustainability into governance structures.

• Disclosure of ESG Practices – the Corporate Governance Code requires retirement funds to disclose their ESG practices, ensuring stakeholders are informed about how sustainability factors are considered in fund management (Botswana Code of Corporate Governance).

• Retirement funds in Botswana are encouraged to align their operations with national development goals and the UN Sustainable Development Goals (SDGs). By aligning with the SDGs, retirement funds contribute to broader sustainable development objectives, promoting long-term value creation and social well-being.

2.8.3. What aspects of sustainability (environment, social or governance) do the metrics, either voluntary or mandatory, focus on?

They focus on:

• Environmental – reporting may include metrics on carbon footprint, energy consumption, water usage, and waste management.

• Social – metrics often cover labour practices, community engagement, health and safety, and human rights.

• Governance – this includes board diversity, executive compensation, anti-corruption measures, and overall governance structure and practices.

2.8.4. Are there any planned future changes to the reporting requirements?

As of now, specific planned future changes to sustainability reporting requirements in Botswana have not been widely documented or publicly available.

2.9.1. What are the legislative requirements for companies in relation to sustainability reporting?

In Namibia, legislative requirements for companies regarding sustainability reporting are evolving, reflecting a growing emphasis on environmental, social, and governance (ESG) factors. However, there are currently no specific, comprehensive laws mandating sustainability reporting for all companies. The landscape is shaped by a combination of sector-specific regulations, voluntary guidelines, and broader legislative frameworks that indirectly promote sustainability practices.

Companies listed on the Namibia Stock Exchange (NSX) are encouraged to adopt good corporate governance practices, which increasingly include sustainability reporting. The NSX guidelines are influenced by international standards, such as the Global Reporting Initiative (GRI) and the Integrated Reporting Framework. Corporate Governance Code for Namibia (NamCode) provides principles and practices for good corporate governance, encouraging companies to integrate sustainability into their business strategies and reporting (Namibian Stock Exchange, 2004). Although adherence to NamCode is not mandatory, it is recommended, especially for publicly traded companies.

Many Namibian companies voluntarily adhere to international frameworks and standards for sustainability reporting, such as the Global Reporting Initiative (GRI), and the UN Sustainable Development Goals (SDGs).

2.9.2. Do these requirements apply to retirement funds and are there additional voluntary reporting requirements for retirement funds?

In Namibia, the regulatory framework for retirement funds does not explicitly mandate sustainability reporting. However, there are relevant regulations and guidelines that encourage good governance and responsible investment practices, which may include aspects of sustainability:

Pension Funds Act, 1956 (as amended): This act governs the establishment and operation of retirement funds in Namibia (U.S. Department of State, 2023). While it does not specifically mandate sustainability reporting, it sets out fiduciary duties for fund trustees, including the prudent management of fund assets, which can encompass ESG considerations (NAMFISA).

Regulation 28 under the Pension Funds Act: This regulation prescribes the limits for the investment of retirement fund assets. It encourages diversification and responsible investment practices, which may implicitly involve ESG considerations (NAMFISA).

Financial Institutions and Markets Act (FIMA), 2021: This act aims to consolidate and modernise the regulation of financial institutions and markets, including retirement funds (NamibLII, 2021). FIMA emphasises good governance, risk management and accountability, which align with broader sustainability principles. The implementation of FIMA may lead to more explicit sustainability requirements in the future (NAMFISA).

Namibia Financial Institutions Supervisory Authority (NAMFISA): NAMFISA oversees the regulation of retirement funds and encourages adherence to good governance practices. While not a direct mandate, NAMFISA’s guidelines and codes of conduct can influence sustainability reporting practices (NAMFISA).

Corporate Governance Code for Namibia (NamCode): The NamCode provides principles for good corporate governance that applies to all sectors, including retirement funds. It encourages the integration of sustainability into governance practices (Namibian Stock Exchange, 2004).

While the current legislative framework does not impose explicit sustainability reporting requirements on retirement funds, the emphasis on prudent management, good governance, and responsible investment practices indirectly supports the inclusion of sustainability considerations.

In Namibia, while there are no mandatory sustainability reporting requirements specifically for retirement funds, there are voluntary frameworks and guidelines that encourage such practices. These frameworks help retirement funds enhance transparency, governance, and sustainability. Voluntary initiatives are UN PRI, GRI, IIRC, SDGs.

These voluntary frameworks and guidelines help retirement funds in Namibia to improve their transparency and accountability, particularly in terms of sustainability and responsible investment practices.

2.9.3. What aspects of sustainability (environment, social or governance) do the metrics, either voluntary or mandatory, focus on?

For those companies and retirement funds that engage in voluntary sustainability reporting, the focus typically covers the following aspects, which is similar to Botswana:

• Environmental – reporting on carbon footprint, energy consumption, waste management, and resource efficiency.

• Social – addressing issues such as employee welfare, community engagement, health and safety standards, and diversity and inclusion.

• Governance – transparency in management practices, board diversity, anti-corruption measures, and ethical business conduct.

2.9.4. Are there any planned future changes to the reporting requirements?

As of now, there are no announced legislative changes specifically targeting sustainability reporting for companies or retirement funds in Namibia.

3.1.1. Overall results

The below table shows the median score in each of the key themes measured by the sustainability reporting index, together with the highest, lowest and standard deviation of the scores.

Figures 1–9 below show the sustainability reporting index scores for each of the funds included in the study, by theme and overall.

Figure 1. Sustainability reporting index – full sample of funds.

Figure 2. Sustainability reporting index – full sample of funds – governance and strategy.

Figure 3. Sustainability reporting index – full sample of funds – delegated investment.

Figure 4. Sustainability reporting index – full sample of funds – financial inclusion.

Figure 5. Sustainability reporting index – full sample of funds – diversity and inclusion.

Figure 6. Sustainability reporting index – full sample of funds – nature: biodiversity.

Figure 7. Sustainability reporting index – full sample of funds – climate change.

Figure 8. Sustainability reporting index – full sample of funds – actuarial integration.

Figure 9. Sustainability reporting index – full sample of funds – overall.

Key observations can be made from the analysis of the most developed countries (Germany, UK, Canada, USA, Japan, and Switzerland). In general, it is easy to find information about the overview of the organisation, its mission, business structure, overarching policy statement about sustainability and environment, for most of the funds. However, when it comes to the questions of sustainable investment strategy, financial inclusion, diversity management or climate change, funds share a varying degree of information. Particularly in the nature and biodiversity metric, under the TNFD framework, no information is available. Notably, TNFD is not yet binding for countries studied in this paper.

In contrast, it is observed that funds provide detailed information about risks and opportunities and different scenario analysis on the topic of climate change, where TCFD reporting is mandatory (e.g. in the UK).

Our observation is that funds consider sustainability in their investment strategy, and make the information available to the public, only when they are legally obliged to do so. Where no legal obligation exists, there are two possibilities: either the funds are not considering ESG factors at all, or the funds are considering ESG into their risk management processes, but they do not publish the information.

The United Kingdom has the highest overall score, followed by Germany and Japan. In terms of legislation and practices as well as availability of data, the UK market is more developed than others. There is no national ESG regulation in the US. Although the Federal Retirement Thrift is one of the largest pension funds of the world, its scores on all matrices are significantly lower than all other funds. Overall, European pension plans are performing better in terms of integrating sustainability into their risk management and business processes compared to North American funds (based on public information).

Key observations can also be made from the analysis of the overall Southern Africa region. All sub-regions have high scores in relation to information about the funds as well as actuarial integration. South Africa has the highest overall score, followed by Namibia and Botswana. The South African market is more developed with additional requirements and practices as well as availability of data. Overall, the scores are quite low and point to an improvement being needed in the disclosure of relevant sustainability-related information to stakeholders.

In terms of ESG integration, Botswana had an extremely low score. This may be due to the information not being publicly available. However, this stood out in the analysis and significant improvement is required on this aspect for this country. While policies in relation to ESG integration were largely observed in South Africa and Namibia, evidence in relation to the monitoring and effectiveness was lacking across the funds surveyed.

The score in relation to governance and strategy in Botswana was particularly low. This is an area that requires significant improvement. Some evidence was observed in relation to addressing climate risks in South Africa, whereas there was no evidence of this in Namibia and Botswana. Funds in South Africa generally scored much higher on financial inclusion than funds in both Namibia and Botswana. This is a function of the additional practices in South Africa. However, the monitoring of the effectiveness of communication and the impact on financial decision-making was generally not present in any of the countries. Diversity, Equity and Inclusion scored highest in South Africa. This is a result of the history of the country.

There was virtually no evidence that nature and biodiversity risks were considered and monitored in any of the regions. This is to be expected given that nature and biodiversity disclosures are at an early stage of development.

Key observations from the analysis of the selected South African funds (given that the database included a number of funds to inform more in-depth studies) includes the fact that lower variability within each of the criteria is present compared to the full sample. This showed that, within the specific areas, disclosure was generally within a small range.

Other than information about the fund, actuarial integration and financial inclusion, other areas of sustainability generally scored poorly. It may be that funds have chosen not to disclose those aspects and that the relevant practices are in place, however it points towards an improvement being needed in the disclosure of relevant sustainability-related information to stakeholders.

Whilst policies in relation to ESG integration were largely observed, evidence in relation to the monitoring and effectiveness was lacking across the funds surveyed. Funds generally scored well on financial inclusion. However, the monitoring of the effectiveness of communication and the impact on financial decision-making was generally not present.

A surprising result was the relatively low level of disclosure around diversity, equity and inclusion. This was especially surprising because this is a key aspect and focus in South Africa, given the country’s history and legislation around transformation and requirements around B-BBEE.

Other than policies in relation to diversity, equity and inclusion being in place, there was no evidence of monitoring and embedding in relation to this aspect.

For funds that scored higher on diversity, equity and inclusion, the focus was solely around transformation aligned to black economic empowerment (B-BBEE) in relation to the local components of their investment strategies. Funds did not apply a wider lens around diversity, equity and inclusion with no observed practices in relation to offshore investments.

Climate change, nature and biodiversity aspects consistently scored poorly across all funds. Only two funds scored above 10% for the climate change aspect, and no funds had any meaningful disclosure around nature and biodiversity risks. Given the significance of these systemic issues and their impact on funds and their funding levels, this is an area that requires more focus.

DB funds scored higher in relation to actuarial integration than DC funds. This is understandable given the financial implications to sponsors in a DB fund. Improvements of how DC funds monitor and communicate expected replacement ratios is required.

In the case of both DB and DC funds, there was no evidence that climate change and its implications have been factored into actuarial valuations or projections. Given the long-term implications of climate change this is an area that requires urgent attention to ensure that the fund’s strategies and funding plans are cognisant of this systemic risk, and to ensure that sufficient mitigation and transition plans are in place to manage the risks and opportunities.

3.2.1. Germany: leading practices

Funds scoring relatively higher in Germany show the following best practices:

• Having policies regarding ESG objective, diversity and inclusion, climate-change, nature, and biodiversity.

• Having broad oversight of DEI related risks and opportunities.

• Having clear objectives and targets for its sustainable investment practices.

• Voluntary signatory of TCFD (Taskforce on Climate-related Financial Disclosure) initiative.

• Annual publication of comprehensive sustainability report.

3.2.2. United Kingdom: leading practices

High scoring funds of the UK show the following best practices:

• Clearly describing how sustainability-related issues create long-term investment values.

• Publishing specific objectives and targets for its sustainable investment activities.

• Monitoring how sustainability-related issues are managed by external investment managers.

• Maintaining effective member communication to facilitate well-informed decision making.

• Clearly mentioning the process of identifying, assessing and managing climate related risks and opportunities.

• Including climate change related scenarios into the actuarial assumptions.

3.2.3. Japan: leading practices

The following best practices are found in Japan:

• Disclosure of detailed breakdown of the assets under the fund’s management.

• Providing the portion of assets managed by geography and by asset class.

• Clearly mentioning the ratio of assets covered by ESG integration.

• Having sustainable investment principles, stewardship principles and proxy voting principles.

• Describing how sustainability-related issues are managed by external asset managers in a detailed manner.

3.2.4. Switzerland: leading practices

Among the reports observed, the following leading features were observed:

• Pension Funds implementing the ESG-Reporting Standard provide good information on their organisation and sufficient details on financial inclusion and governance. This information will be given in a general manner for the private funds and a more detailed overview is observed in the public fund

• The extent of information on impact metrics remains limited due to minimal reporting standard requirements and difficulty in assessing double materiality from lack of data.

• Social factors are mostly addressed as policy, with only one pension fund among the ones observed addressing them specifically.

• Investment strategy goals are mostly set individually, aiming not to harm the fiduciary duty towards pensioners and insured actives.

• Exclusion Policies are part of the Reporting and its criteria. Nonetheless, dialog will be sought with portfolio companies that can improve their rankings (positive screening), their improvement will be monitored and results will be published as well.

• The number of pensions following the ESG-Reporting Standard is growing, but formal disclosure is not a priority for many pension funds due to the supplementary costs.

Pension funds have a duty to maintain and inform members about the state of their benefits or progression, both globally and individually. Nonetheless, pension funds do not yet consider climate change or biodiversity risks in the setting of assumptions for actuarial reports on liabilities.

3.2.5. North America (USA, Canada): leading practices

In North America these include:

• Mapping the United Nations Sustainable Development Goals (SDG) to the organisation’s beliefs, policies and ESG Strategic plans.

• Detailed policy regarding governance and sustainable investment strategy.

• Disclosure of ESG reports or integrated annual reports.

• Describing the resilience of the fund’s strategy by analysing different climate related scenarios

• Monitoring the effectiveness of communication and ensuring good decision-making for the defined contribution members.

3.2.6. Southern Africa (includes South Africa, Namibia, Botswana): leading practices

For the funds that scored the highest in each of the various categories, the following aspects stand out as best practices:

• Detailed policies in relation to sustainable investing, diversity, equity and inclusion, and climate change.

• Disclosure of ESG reports or integrated annual reports.

• Monitoring and communicating individual member outcomes on defined contribution funds.

• Demonstrating real-world impact in relation to investments (in addition to risk and return of investment portfolios).

• Monitoring effectiveness of communication and decision-making in relation to defined contribution members.

• Making retirement benefits counselling available to members at key events (joining a fund, annual option choices, on withdrawal, at retirement, annually after retirement)

• Funds being voluntary members of the PRI and CRISA 2.0 and adopting some sense of active ownership and ESG focus when setting out investment policies.