The corporate response to the socially responsible investment (SRI) index of the Johannesburg stock exchange (JSE)

Abstract

This paper examines the trend in corporate response to the social responsible investing index (SRI) of the Johannesburg Stock Exchange (JSE). The motif of the paper is to discover how and if SRI drives corporates towards public declaration of their social responsible investments. The approach is archival with a descriptive and quantitative analysis of data drawn from the Johannesburg Stock Exchange. Descriptively, we charted a trend of the rate at which the JSE firms join the JSE SRI Index, and our findings indicate an upward trend from 2004 to 2013. Quantitatively, we examined the likely difference in corporate climate disclosure before and after the introduction of the Code for Responsible Investing in South Africa (CRISA). Our findings – using a T-Test of difference in means, indicate a significant difference in means, which apparently show that the CRISA may have added further impetus to corporate climate disclosure. In 2013, the JSE SRI deepened its stringency in measuring corporate responsible claims by assessing only the publicly available responsible information of corporations for inclusion in its SRI index. We thus evaluate possible difference in climate disclosure before and within the year of the new stringent criteria of measurement. Our second T-Test of difference in means also shows a significant difference in means, which signal that corporations exerted extra efforts in making the extent of their climate responsibility publicly available. We conclude that the JSE SRI, coupled with the CRISA motivates firms to improve on their public disclosure. We also conclude that the carbon disclosure project (CDP) is adding pragmatic momentum on the activities of JSE firms to strive towards their improvement in climate performance. Thus voluntary codes and indexes, in the absence of binding regulations, could spur corporate social and environmental initiative in a developing country.