Allocators of capital that wish to stand out in today’s competitive global finance and investment landscape must find ways to create impact in addition to mitigating risk.
This explains why growth, jobs and the just energy transition featured strongly during a sustainable finance-focused panel discussion at the recently held Financial Sector Conduct Authority (FSCA) Conference 2026, in Johannesburg.
The debate, held under the banner ‘From risk avoidance to impact, the next frontier of sustainable finance and the role of transition finance’, put an African lens on environmental, social and governance (ESG) trends in global financial markets.
Although focused on financing and investment, many of the themes raised, including disclosure, capital allocation and transition risk, are relevant to Africa’s insurers and reinsurers, who have a responsibility to invest their insurance float sustainably, and with impact.
FSCA departmental head for policy support, Kershia Singh, opened the panel by saying the sustainability finance discussion was often skewed towards risk management.
“Risk management is still important; but investors, policymakers and society are increasingly requiring that capital be directed to drive positive real economy outcomes,” she said.
Delivering impact
Asset managers, banks and insurers are being pressed to use their capital to deliver impact around the environmental and social pillars of ESG. “A key concept in the shift towards impact is that of transition finance,” Singh said. Narrowly framed, the challenge is to reduce emissions while supporting affected workers and communities.
South Africa has been a key advocate for a ‘just’ approach to transition finance, presenting its Just Energy Transition Investment Plan (JET IP) at COP27 in Sharm El Sheikh, Egypt, in November 2022. The plan sets out the investments needed to support the country’s decarbonisation commitments in line with the Paris Agreement (an international climate treaty that South Africa signed in 2016) while still supporting growth and jobs.
Nathan Fabian, chief sustainable systems officer at the UN Principles for Responsible Investment (UN PRI), was on hand to share an international view on finance as an enabler of real-world change. He noted that PRI signatories represented around US$130 trillion in assets globally, and that this capital was exposed to systemic risks such as biodiversity loss and climate change.
The big trend shift seen in the UN PRI space is that signatories are seeking more guidance on how to implement the PRI’s six principles in practice.
“We are helping our signatories by introducing things like sustainability targets into their investment frameworks,” Fabian said. Apart from a “target and transition plan” approach, signatories were also engaging with academic think tanks and policymakers to find ways to manage these transitions.
Fabian offered a couple of tangible examples of this trend shift in action. Some centred around the development of financing instruments for emerging economies.
“Several PRI signatories were deeply involved in the Forest Forever facility that was announced at COP 29 and promoted at COP 30,” he said. Others sought to respond to the climate change narrative, as in the case of Swedish pension funds issuing fixed income products using a climate-aligned transition benchmark.
Sustainability metrics disclosures
Singh shifted focus to South Africa’s financial market, introducing a benchmark study on responsible investment conducted by Just Share, a shareholder activism NGO focused on corporate accountability around sustainable finance. The study revealed that none of South Africa’s largest asset managers disclosed sustainability metrics consistently.
“There is a huge transparency deficit in the South African market,” said Karishma Bhoolia, senior climate risk analyst at Just Share, before outlining a number of concerns. Asset managers were not sharing details around net zero targets or transition plans, and where they did, reporting was inconsistent across portfolios within brands, and across the industry.
According to Bhoolia, asset managers needed regulatory clarity on what they were meant to disclose and what a credible transition plan should look like.
“We think policy standardisation is going to be the key to shift us from risk management to outcomes-based [approach on impact in investment],” she said. This part of the panel discussion may have set the regulatory ‘wheels’ in motion at both the FSCA and its twin-peaks framework partner, the Prudential Authority (PA).
Policy standardisation
Eric Kane, director of ESG research at Bloomberg Intelligence, had gone into some detail around global trends in carbon capture and storage and climate adaptation-focused financial instruments in a presentation just prior to the panel discussion. He joined the panel to expand on this overview.
“The key is for policy and policy standardisation around the verification, accounting and ultimately pricing of any type of removal credit that may be out there,” Kane said, in response to how to measure the industry’s decarbonisation impact. He singled out UN Article Six under the Paris Agreement as a good starting point, before mentioning various sustainability challenges around carbon capture, notably cost.
He offered a couple of African examples. First, a carbon capture and removal project in Kenya using cheap and low-carbon-emitting geothermal energy. Second, a carbon removal project underway in Sierra Leone that is focusing on restoring mangrove wetlands. “This project was built around a kind of community consensus … it provided alternatives to wood stoves to the community … and around 50% of any carbon credit sales will go back to the community,” Kane said.
The last participant to weigh in on the debate was Shameela Soobramoney, recently appointed commissioner at South Africa’s Presidential Climate Commission and CEO of the National Business Initiative. Singh asked her about priorities to keep Africa on a credible and inclusive transition path.
“When we think about transition in South Africa, job losses are often the biggest concern; and those are the jobs that relate predominantly to the coal value chain,” Soobramoney said.
She noted that every job mattered in an economy with close to 40% official unemployment rate. Solutions will depend on understanding what a just transition looks like, and having a credible plan for alternate economic activity to replace affected industries.
Debt concerns
Policymakers need buy-in from affected communities while financiers need assurances on payback loops.
“We can borrow money to support a transition, but what are we producing that is going to pay that debt back,” asked Soobramoney. “This is relevant for many developing economies with a similar energy profile to what South Africa has.”
The panellists noted that transition finance deals offered to Africa were largely debt-based, and that even concessional debt had to be repaid.
To achieve transition goals, government policymakers must be clear about the investible ‘sunrise’ industries and the investment incentives on offer. This requires engaging the financial sector on a preferred, sustainable economic pathway.
Soobramoney briefly commented on the impact of the European Union’s (EU’s) Carbon Border Adjustment Mechanism (CBAM), which aims to prevent carbon leakage by imposing a carbon cost on certain imports comparable to that faced by EU producers. The point being made was that global policy is already introducing constraints to certain African industrial complexes.
There were so many issues rolled into this discussion that your writer found it challenging to close this write-up. Singh reached out to a couple of the panellists for their parting thoughts, quizzing Kane about the regulatory tools Africa might use to attract international transition financing.
He singled out accuracy, comparability, credibility and transparency as non-negotiable in this pursuit before suggesting blended finance guidelines, green taxonomies and transition bond standards as important supporting frameworks.
Fabian was asked to wrap up with some thoughts on how to move asset managers from compliance-driven ESG reporting towards outcome-orientated and transition-aligned capital allocation.
He said all professionals should consider the inevitability of the current transition and called on regulators to think about their role in capacity building, incentive setting, obligations, systems capability and trust. This reads a bit like a list, dear reader, but that seemed the best way to precis a rather wordy concluding remark.
Fabian noted that allocators of capital need “a level playing field” to compare opportunities across borders. They also want policymakers at both the government and regulatory levels to set clear rules around disclosures and environmental benchmarks. To attract funds, Africa’s regulators must ensure “transparency and confidence in financial product construction, and transparency about what is going on inside that product.”
He congratulated South Africa on its sound, principles-based regulatory framework, but concluded that “the level of execution, follow through and comparability was not yet where it needed to be.”