​EPPF Launches it's Revised B-BBEE Policy

The Eskom Pension and Provident Fund (EPPF) which celebrates 80 years of existence this year committed itself to drive transformation in the Financial Services Sector this morning when it hosted a breakfast session attended by industry expects, asset managers, stock brokers, private equity fund managers and regulators. EPPF is one of the largest remaining Defined Benefit Funds in South Africa and manages in excess of R70 billion in assets on behalf of its 81 000 members.

"Given the significant assets we manage, we believe we are well positioned to take a lead in driving the transformation agenda in this industry. The survey that we conducted late in 2010 indicated that transformation was happening at a very slow pace which informed our approach in our revised policy. The revised policy now has clear time lines and penalties for non compliance" said Sbu Luthuli, the Chief Executive of the EPPF. In 2010 the EPPF commissioned a survey to better assess the status of transformation in the asset management industry. The survey focused on four elements of the BBBEE scorecard which collectively weigh 60% in the overall scorecard, namely: Ownership, Management Control, Employment Equity and Skills Development.

The findings of the study can be summarised as follows:

  1. Asset Managers transformation initiative have been rather responsive to legislation and regulations than proactive.
  2. Where Trustees and asset owners drive BBBEE initiatives, asset managers tend to comply.
  3. Public Sector and State Owned Entities are the most active in pushing the industry to transform.
  4. Within asset management companies, investment teams consisting primarily of economists, analysts, portfolio managers and investment strategists were largely still untransformed. Administration and client servicing teams had the highest representation of Black individuals.
  5. The low number of Black individuals in key investment positions was largely attributable to a skills development gap, as insufficient numbers of Black individuals hold the relevant qualifications in economics, accounting and finance.
  6. The survey found that 20% of Black individuals out of the asset management companies surveyed had a Chartered Financial Analyst (CFA) qualification and 37% had a Bachelor of Commerce degree.
  7. The study further found that a number of asset management companies had initiated programs to bridge the skills development gap but this pace was low.

    It is against this backdrop that the Board of Trustees of the EPPF has recently approved a revised Broad-Based Black Economic Empowerment (BBBEE) Policy for the Fund's investments. The Fund's BBBEE policy aims to make a contribution towards accelerating the participation of the previously disadvantaged in the Financial Services Sector.

    The policy requires all asset managers to achieve a level 3 BBBEE rating. Non complying managers will be given a 12 month window period to comply. It further encourages managers to strive for a 50% Black representation at both board and executive director level as well as a 40% Black representation at top management.

    The policy requires asset managers to implement effective Skills Development initiatives. The asset managers are also required to achieve a threshold of 40% in each of the employment equity targets (senior, middle and junior management as well as people living with disabilities) in year 1 and 66% in years 2 and 3. Non compliance with the policy will result in a 10% reduction of EPPF's assets allocated to the non compliant asset manager in year 1 and if non compliance continues, the entire mandate will be reviewed.

    As an active investor, EPPF is also proud to be one of the first few signatories of the United Nations Principles for Responsible Investing (UNPRI), putting the Fund at the fore of championing the notion that environmental, social and corporate governance (ESG) issues can affect the performance of investment portfolios and therefore must be given appropriate consideration by investors if they are to fulfil their fiduciary duty. The Fund is also a signatory of the Code of Responsible Investing in South Africa (CRISA), helping the EPPF to effectively execute its investment analysis and activities, as well as to exercise sound governance.

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