The world over, companies are facing mounting pressure from consumers, government regulations and the financial risks associated with climate change to practise environmental and social responsibility. Organised financial marketplaces, or exchanges, such as South Africa’s Johannesburg Stock Exchange (JSE), can make an important contribution by leveraging their position to influence entire business networks and industries in adopting more sustainable business practices.
Exchanges around the world have shaped corporate sustainability practice through three main avenues: listing rules calling for sustainability disclosure, the development of investable products such as sustainability indices and the use of convening power to initiate dialogue and encourage the adoption of sustainable business practices. The JSE has been at the forefront of some of these developments, moving early and assuming a leadership role internationally.
Rules and disclosures
Sustainability disclosure, in which companies share their environmental, social and governance (ESG) impacts, risks and performance, has moved on from a mere communications exercise reflected in an annual report. It is now a mechanism through which capital markets price risk, reward genuine performance and hold companies to account. Investors price sustainability-related risks and opportunities into the cost and availability of capital, based on transparent, comparable information. Companies that demonstrate deep integration of sustainability into their strategy and operations earn better access to capital over time, as they are able to establish more predictable models of future success. Those that cannot may face greater scrutiny, as their future potential is less predictable.
South Africa enters this conversation from a position of unusual strength. A long tradition of voluntary sustainability and integrated reporting has led to a level of transparency and disclosure that provides valuable insights for investors and the capital markets they serve. This foundation is reinforced by the JSE Listings Requirements, which require issuers to apply and explain the principles of the King Code, outlined in the King IV Report on Corporate Governance for South Africa, and disclose how those principles are implemented, rather than relying solely on voluntary adoption. The architecture behind these requirements has matured quickly: the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards have set a global baseline that more jurisdictions are adopting, the new King V Report on Corporate Governance sets local expectations, and the JSE’s own guidance helps issuers navigate a still-crowded landscape.
Comprehensive disclosure requirements are effective in drawing attention to sustainability issues that otherwise may not be considered. Disclosure requirements can, however, be onerous and exchanges must balance raising the disclosure bar against proportionality and affordability for smaller issuers. Efforts to consolidate multiple standards will help, but for the teams doing the work, this can feel less like consolidation and more like constantly shifting the goalposts. Keeping up with evolving frameworks while meeting targets and commitments has become a major challenge for sustainability teams and the businesses they support. The more durable model is to provide guidance, tools and phased expectations rather than uniform rules, regardless of size or resources. The direction of travel matters more than any single standard: issuers should align now, in a way that is materiality-led and phased, rather than wait for a mandatory regime to be finalised.
Reporting provides a reflection on an organisation’s sustainability position and sustainability-related risks, but importantly, it is the processes and activities that underpin reporting that shift practice. The requirement to disclose also plays a role in driving these shifts. The preparation of a credible report forces an organisation to confront where the data is missing, who owns which metric, whether targets exist at all and which processes were never built. But the influence of reporting is limited. While an exchange can require a company to tell the market what it is doing, it cannot compel the company to act in the interests of sustainability. Disclosure enforces transparency about performance but does not compel actual change. Companies may practise superficial sustainability disclosure, referencing a response to a wide range of sustainability topics in their reporting in the interest of improving their rating scores, without actually shifting business practice towards sustainability in any meaningful way.
“Engagement with new disclosure standards is still driven largely by obligation rather than strategy.”
This reality raises the question of whether better sustainability disclosure follows better practice, or if the requirement to disclose drives better practice. What matters is that the publicly disclosed sustainability ambitions, targets and achievements are then managed, measured and improved.
Products that incentivise sustainability
Among the mechanisms exchanges might use to drive more sustainable business practices is the introduction of products linked to sustainability and responsible business practice. The JSE was the first emerging market to launch an exchange-sponsored sustainability index, introducing its Socially Responsible Investment (SRI) Index in 2004. The SRI Index was succeeded in 2015 by the FTSE/JSE Responsible Investment Index Series, developed in partnership with FTSE Russell and comprising the Responsible Investment Index and the Responsible Investment Top 30 Index. These products give investors exposure to companies that meet defined ESG performance criteria, offering a sustainability-focused lens on the South African market. The JSE was also the first exchange in Africa to establish a dedicated Sustainability Segment for green, social, sustainability and sustainability-linked debt instruments and in 2023, it launched its Voluntary Carbon Market.
Aside from attracting capital flows, the rigour applied to instruments such as these carries reputational weight with investors. As a result, chief executives and boards pay attention to their company’s inclusion in or exclusion from these indices, which can supply the mandate and motivation for sustainability teams to improve practice to qualify. Similarly, participation in sustainability-linked financial instruments affects the cost of capital, which will be of interest to both chief financial officers and boards.
A limitation of such products in driving sustainability is their reach. While they may attract ambitious companies looking to build their reputations and financial opportunities, these mechanisms are not always enough to persuade companies that are less responsive to such drivers. It is often these companies where practice needs to shift the most.
Convening and influence
The United Nations Sustainable Stock Exchanges (SSE) initiative, launched in 2009, positions exchanges as a lever for sustainable capital markets, on the basis that an exchange reaches every issuer on its board − not only the largest or most willing.
Locally, the JSE’s international relationships mean the exchange has a part to play in influencing policy and convening parties. The JSE was one of five founding SSE partner exchanges, committing to promote sustainability in capital markets at Rio+20 in 2012.
The JSE’s involvement in local and global sustainability initiatives extends beyond its regulatory role. Through engagement with policymakers, investors, standard-setters and peer exchanges, it helps interpret emerging developments for the South African market and supports greater understanding of sustainability-related risks, opportunities and reporting expectations. In this way, the exchange acts not only as a rule-setter but also as a translator, bringing global developments into local context and building the market’s capacity to respond.
Through these forums, the JSE is well-placed to advance the sustainability imperative and communicate developments, trends and priorities to the market. However, convening produces alignment, not obligation; agreement on a roadmap does not, on its own, change practice inside a company.
Good leadership supports sustainability
Many of South Africa’s large listed companies have embedded sustainability in meaningful ways. Where they have, a pattern of leadership that treats sustainability strategically rather than as a reporting obligation is evident. In those companies, sustainability sits at strategy level, features in board conversations and has entered the mainstream risk agenda, with enterprise risk teams driving climate scenario analysis. Certain sectors are pushing further still, most visibly around nature-related risk and what nature means for business models.
However, progress is not uniform, and embedding sustainability in a company’s thinking and practice often stalls in the boardroom. One contributing factor may be the lack of director qualifications or experience in sustainability-related fields. A 2025 briefing by shareholder activism organisation Just Share found that 22 of the top 40 company boards (55%) did not have a single director holding a formal sustainability-related qualification, while directors with such qualifications occupied only 5% of all top 40 directorships. Qualifications are, of course, not the same thing as experience, and no single credential makes a director sustainability-competent, but the numbers illustrate the scale of the task. Where these capabilities are missing, the inability to integrate sustainability tends to play out in three ways:
- First, directors who lack confidence in the subject matter may not engage effectively or strategically with the content. The result can be limited challenge, less debate and fewer probing questions to sharpen strategy, or a reflexive ‘no’ that sends executive and sustainability teams back to the drawing board to re-justify the work.
- Second, peer pressure can play a role: boards sign up to sustainability commitments without interrogating if these are practically achievable and why they make sense for their specific business.
- Third, boards without a deeper understanding of sustainability imperatives, practices and measurement may become distracted by a single initiative rather than the broader strategic question of how sustainability might be embedded across the organisation.
These patterns reveal themselves across the market where leadership exists in isolated pockets and within companies where sustainability maturity is isolated in reporting departments and index committees rather than integrated across the business.
Ongoing board capacity building is a critical enabler for embedding sustainability within organisations. Deliberate, ongoing board education spanning climate risk, nature risk and social issues is a responsibility organisations must own, not an optional extra.
Balancing the rear-view mirror and the road ahead
Two decades of disclosure infrastructure has not yet translated into equally advanced practice across the market, yet there has been real and measurable progress. The JSE has been a leader in this field and a key influencer in shifting sustainability practice. Few institutions command a board’s attention the way its exchange does: listing obligations, index inclusion and direct engagement all land at director level. But what the exchange can require is transparency on performance and keep the subject in front of directors through guidance, capacity building and engagement with boards. It cannot control the performance itself, set a company’s ambition or allocate its resources.
What, then, will distinguish organisations that truly embed sustainability from those that only talk about it? The answer lies in the ability to hold two views of the company in focus at once: the retrospective view of performance offered by financial reporting and the forward-looking view that sustainability demands. Companies that balance both will be the ones that unlock opportunity, competitiveness and long-term value creation.
Looking ahead, the exchange’s role remains what it was in 2004: keeping South African companies visible, comparable and investable in global capital markets, and encouraging a disclosure discipline that supports action that extends beyond the report. But the JSE’s influence can only take a market so far. The rest depends on the boards and executives: they set the ambition, allocate resources and deliver the evidence of progress that disclosure then reports.
A timeline of South Africa’s sustainability disclosure landscape for the designer to build.
| Year | Milestone |
| 2004 | JSE launches the Socially Responsible Investment (SRI) Index − the first sustainability index created by an exchange in an emerging market |
| 2009 | UN Sustainable Stock Exchanges (SSE) initiative launched |
| 2010 | JSE incorporates aspects of King III as a listing requirement |
| 2012 | JSE becomes one of five founding partner exchanges to commit to SSE at Rio+20 |
| 2015 | FTSE/JSE Responsible Investment Index Series launched with FTSE Russell |
| 2016 | King IV published, introducing the apply-and-explain approach; JSE Listings Requirements subsequently update relevant governance provisions |
| 2022 | JSE publishes voluntary Sustainability and Climate Disclosure Guidance |
| 2023 | The International Sustainability Standards Board (ISSB) issues final IFRS S1 and S2 standards; JSE launches Voluntary Carbon Market |
| 2024 | The Companies and Intellectual Property Commission (CIPC) extends its inLine eXtensible Business Reporting Language (iXBRL) taxonomy, enabling voluntary tagging of IFRS S1 and S2 disclosures; Amendments to the Companies Act 71 of 2008 introduce changes to social and ethics committees |
| 2025 | King V launched, effective for financial years from 1 January 2026 |
| 2026 | Regulatory groundwork continues at the Department of Trade, Industry and Competition and the CIPC towards eventual mandatory ISSB-aligned reporting |
