Johannesburg Stock Exchange lists ‘Socially Responsible’ ETF

  • 1nvest, a specialist index fund manager, lists the 1nvest MSCI World Socially Responsible Investment Index Feeder ETF (ETFSRI) on the Johannesburg Stock Exchange (JSE)
  • The listing of ETFSRI brings the number of ETF listings on the JSE to 91 with a total ETF market capitalization of more than R114 billion
  • Johannesburg Stock Exchange delivered a strong financial performance in the first half of 2022 as it continues to drive growth

A specialist provider of index-tracking investment solutions, 1nvest, has listed a new exchange-traded fund (ETF) on the Johannesburg Stock Exchange (JSE). The ETF comprises socially responsible large and mid-cap companies operating across 23 developed markets.

The JSE is currently ranked in the Top 20 largest stock exchanges in the world by market capitalization, and is the largest stock exchange in Africa, having been in operation for over 130 years.

Read: The JSE an Emerging Markets treasure trove

According to an article by Business Live published July 28, 2022, the 1nvest MSCI World Socially Responsible Investment Index Feeder ETF (ETFSRI) takes the number of ETF listings to 91 with a combined market capitalization of more than R114bn. The ETF tracks the performance of the MSCI World SRI Select Reduced Fossil Fuels Index by investing in the iShares MSCI World SRI UCITS ETF.

The underlying constituents of the new 1nvest ETF, which will track the MSCI World SRI Select Reduced Fossil Fuels Index, are companies that mitigate risks posed by climate change and exhibit high levels of the environment, and social, and governance (ESG) performance.

According to an article published by the JSE on July 28, 2022, to qualify for inclusion in the index, companies are required to have an MSCI ESG rating of ‘A’ or above.

The ETF has an investment mandate that excludes companies in industries related to goods and services such as nuclear weapons, tobacco, civilian firearms, conventional weapons, alcohol, gambling, adult entertainment,   genetically modified organisms, thermal coal, and oil & gas.

Director of Capital Markets at the JSE, Valdene Reddy, said that the listing of the latest 1nvest ETF demonstrates the JSE’s commitment to remain a capital-raising platform of choice. As this segment grows, a listing on the JSE enables ETF issuers to attract investors that aim to diversify their portfolios, while fulfilling their ESG objectives.

“The weather conditions that are currently being experienced across the globe, are a reminder of the impact of serious environmental considerations. Globally, we are experiencing unusual weather conditions, including droughts and floods, at a rate that has never been seen before. ETFs like ETFSRI is important and essential as they are helping in the global commitments to manage climate change,” explains Reddy.

According to Reddy, the JSE remains committed to creating an enabling environment that provides issuers and investors with a platform and relevant product to facilitate responsible investing.

“The 1nvest MSCI World Socially Responsible Investment Index Feeder ETF gives investors cost-effective and Rand-denominated access to a global index that takes a more meaningful screening and exclusion approach to evaluating stocks from an ESG and responsible investing perspective. Better yet, the underlying index has shown compelling long-term performance against the MSCI World Index,” concludes Ntombenhle Radebe, 1nvest Business Development Manager.

In June 2022, the JSE introduced its Sustainability and Climate Disclosure Guidance to promote transparency and good governance and guide listed companies on best practices in environmental, social, and governance (ESG) disclosure. The guide aims to support businesses expand the quality and accessibility of information on sustainability-related risks and prospects that affect their organizations’ financial performance and impact on communities, the environment, and the economy.

In addition, the Financial Sector Conduct Authority (FSCA) approved amendments to the JSE listings requirements, which will reduce red tape and create an enabling environment for companies listed on the bourse.

According to an article by African Markets published May 5, 2022, the amendments are a culmination of a comprehensive consultation process with market participants and the FSCA aimed at achieving a level of effective and appropriate regulation for companies listed on the JSE’s Main Board and Alternative Exchange (AltX).

“The global regulatory landscape continues to evolve and it is important that we engage market participants and ensure that we amend the JSE’s listing requirements so that we strike a balance between the regulatory responsibilities of the JSE as well the obligations placed on listed companies by the JSE. As we have done in the past, we will continue to focus on cutting red tape measures through engagement with our stakeholders to enhance the regulatory experience of our market as we ensure the protection of investors,” said Andre Visser, JSE’s Director for Issuer Regulation.

“The JSE is confident that the amendments are fit for purpose; create an enabling regulatory environment and appropriate level of regulation that will ensure a fair, efficient, and transparent financial market. The amendments have also been aligned with international standards and benchmarks,” he said.

Read: 2022 a defining year for Zimbabwe’s capital markets

Meanwhile, the bourse delivered a strong performance in the first half of 2022 driven by revenue growth across all segments and disciplined cost management.

The all-share index surged to a record high of just under 76,000 points on January 13, before pulling back a little since. Its advance since the beginning of 2021 now sits at 26.5%, while that of the top 40 is shy of 26%. (Photo/ Business Live)

According to an article by African Markets dated August 2, 2022, earnings before interest tax depreciation and amortization (EBITDA) increased by 20% to R627 million, with the EBITDA margin improving from 42% to 45% in the corresponding period in 2021. Headline earnings per share (HEPS) increased by 29% year-on-year (YoY) to 542.7 cents per share. The JSE’s core business model, underpinned by quality earnings and strong cash generation, continues to provide a solid foundation for growth.

  • Primary Market: Revenue increased by 9% to R81 million (2021: R74 million)
  • Equity Trading: Revenue increased by 9% to R260 million (2021: R240 million)
  • Equity Derivatives Trading: Revenue increased by 13% to R83 million (2021: R74 million)
  • Bond and Interest Rate Trading: Revenue increased by 6% to R38 million (2021 R36 million)
  • Currency Derivatives Trading: Revenue increased by 12% to R20 million (2021: R18 million)
  • Commodity Derivatives Trading: Revenue increased by 5% to R49 million (2021: R46 million)
  • JIS: Revenue increased by 46% to R76 million (2021: R52 million)

Leila Fourie, Group CEO at the JSE said, “Throughout this period, uncertainty in the markets manifested in volatility and higher trade activity. The depth of the JSE’s operational capabilities has ensured resilience during these volatile periods. I am particularly pleased with the contribution of annuity revenue derived from business uncorrelated to trading activity and our disciplined cost management. These steady improvements create positive momentum and together underpin the quality of earnings in line with our strategy.”

Read: Zimbabwe Stock Exchange to list Forth Exchange Traded Fund (ETF)

Albert is a Chemical Technologist and Author. He is passionate about mining, stock market investing, Fintech and Edutech.

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