An inductive analysis of ESG practices and assumptions of materiality amongst South African asset managers

Master Thesis


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South Africa is a country burdened by the overhang of apartheid and recent state capture, and desperately trying to balance economic growth with well-being of all stakeholders. This has opened the door for ESG practices to provide holistic solutions for both society and business. This is made particularly relevant by applying business resources to the most relevant ESG issues facing companies, the focus of this study. To achieve the objective of promoting positive societal outcomes through better corporate engagement with ESG, the study analysed 22 asset managers, 25 companies and 25 earnings call transcripts for the opinions of asset managers, companies and analysts on which issues were material to them across five industries. Alongside this analysis, asset managers were interviewed for their opinion of ESG as it is currently practiced in the South African market, where they saw barriers to its practice and where potential improvements could be made. The study found alignment between asset managers and companies on the majority of material issues, but little alignment with analysts, suggesting a break-down in conversation between investors and companies. In particular, the issue of governance was stressed as the most important issue category by asset managers across all industries, but was given little air-time by both companies and analysts. These findings were consistent with the literature on investor perspectives of ESG, company ESG disclosure and materiality. The author suggests a model for materiality be developed to gauge company response to material ESG issues more consistently and aide engagement. Key words: ESG, sustainability, materiality, decoupling, disclosure