Creating an index to measure the integrity of investment companies investing responsibly

Abstract: This research was motivated by the fact that many forms of measuring environmental, social and governance (ESG) integration in companies existed, each having advantages and disadvantages. Accordingly, the research aimed to contribute to the establishment of a more comprehensive and standardised framework to benchmark companies regarding ESG issues. The primary method used to obtain quantitative data for this study was by means of a questionnaire which was sent to South African asset and fund managers. A sample of 29 asset managers were selected on the basis that they had completed the Alexander Forbes Investments Responsible Investing Survey. The main objective of this research was to look at a number of responsible investing indicators used in the South African business environment with the intention of merging them into one suitable index. This newly created index called the Total RI Index, would provide a holistic view of how asset managers integrate environmental, social and governance (ESG) factors in their decision-making process. The introduction of the Total RI Index aimed to provide a better understanding of current thinking within companies regarding the processes, barriers and opportunities to improving the integration of ESG in the investment decision-making process. The findings relating to the Total RI Index scores reveal that, when interrogated further, it is evident that some of the asset managers in South Africa are experiencing ESG integration challenges. Due to the challenges faced by investors to measure ESG, the Total RI Index could become a useful tool to test the integrity of claims made by asset managers in South Africa that they are investing responsibly.M.Com. (Business Management