Reframing ESG: South Africa’s Investment Reality

During a recent sustainable finance focussed roundtable in Johannesburg, industry experts shared that growing gap between global ESG frameworks and the practicalities of investing across Africa. For South African investors, fund managers and advisers, this is already shaping how capital is raised, structured and deployed.

The experts discussed that ESG is not new to South Africa and businesses have long operated with a strong focus on social impact, job creation and community development. What has changed is the expectation that these outcomes are formalised and reported in line with global standards.

In a global context, ESG is being recalibrated rather than withdrawn and while public positioning has softened in some markets, particularly in the US, these considerations remain embedded in investment decision-making. This is reflected in the fact that 88% of institutional investors report increasing their use of ESG information in decision-making (EY Global Investor Survey, 2024). European capital, in particular, continues to apply ESG requirements consistently across emerging markets.

Speakers at the event explained that for South African businesses, ESG is no longer simply a narrative but an increasing prerequisite for accessing capital. At the same time, it is not always experienced as a value driver. For many businesses, particularly SMEs, ESG remains a reporting burden, with requirements that can feel disconnected from day-to-day operations.

This is where the tension becomes most visible. SMEs are central to economic growth and employment across the region, yet ESG frameworks are often applied in ways that do not reflect their scale or capacity. Businesses are expected to report against multiple frameworks, often simultaneously, with limited internal resource and inconsistent data. In some cases, entire roles are dedicated to ESG reporting, even within relatively small teams.

“In practice, ESG is shifting from a reporting exercise to a determinant of capital access.”

The challenge is ensuring that frameworks reflect what is materially relevant within African markets.

Striking a healthy balance in priorities is particularly evident across the ESG pillars. While environmental considerations continue to shape global frameworks, in many African countries social and governance factors are more immediate drivers of value. Job creation, financial inclusion and governance structures remain closely linked to economic resilience, although this is not always fully reflected in funding.

A related consideration discussed by the experts at the event was the emphasis placed on emissions reduction in markets that are already relatively low emitters, while more immediate priorities such as climate resilience, infrastructure capacity and business continuity receive less attention. This can create a degree of misalignment between reporting requirements and on-the-ground priorities.

Governance is also emerging as a key point of convergence. For investors, it provides assurance and for businesses, it underpins the ability to scale sustainably. In many cases, well-established governance frameworks are a determining factor in whether capital can be deployed effectively and with confidence.

However, fragmentation in the reporting standards continues to create complexity. Different investors often apply different requirements, requiring similar information in varying formats, which can introduce inefficiencies and increase the operational burden associated with compliance.

Discussions also highlighted that technology is beginning to support greater efficiency in ESG reporting, particularly through automation and improved data management. At the same time, it introduces additional considerations around data governance, security and regulatory alignment, areas that are becoming increasingly relevant as ESG frameworks continue to evolve.

Addressing these challenges requires structures that can help bridge global expectations with market-specific considerations. International finance centres (IFCs) such as Jersey continue to play an important role in facilitating this by providing stable, well-regulated platforms through which capital can be pooled, governed and deployed across jurisdictions. Jersey’s long-standing role in supporting cross-border investment into Africa reflects the importance of structuring environments that balance international standards with the needs of diverse markets.

This is particularly relevant in the context of energy transition. South Africa’s pathway will differ from other markets, reflecting both its current energy mix and broader development priorities. The scale of the opportunity is significant and Africa is estimated to require between US$130 billion and US$170 billion annually to meet its infrastructure needs (Africa-Europe Foundation, 2025).

Across the financial ecosystem, ESG is increasingly being applied as part of a broader development lens. Financial institutions are integrating ESG considerations into funding decisions, particularly in areas such as SME growth, infrastructure and employment. There is also growing recognition that ESG should be viewed not only as a compliance requirement, but as a framework for supporting sustainable economic outcomes.

For South Africa, the focus is less on adoption and more on alignment, particularly aligning global standards with the current market conditions, investor expectations and policy frameworks with long-term development priorities. Achieving this will require greater coordination across the investment value chain, as well as more consistent policy direction. For long-term capital, clarity and stability will remain essential.

“Addressing these challenges requires structures that can help bridge global expectations with market-specific considerations.”

As ESG continues to evolve, the ability to connect global capital with investment opportunities in a way that is both robust and adaptable will remain critical. Jurisdictions with established expertise in cross-border structuring and sustainable finance are well placed to support this transition and help investors navigate complexity while enabling capital to flow efficiently into markets where it can deliver long-term impact.