Impact of stricter ESG disclosure mandates under Corporate Sustainability Reporting Directive (CSRD)

The European Union’s CSRD will require EU-listed companies to include detailed ESG transition plans in annual reporting from 1 January 2026, introducing more prescriptive reporting standards than its predecessor, the Non-Financial Reporting Directive (NFRD).

Use of non-financial key performance indicators (KPIs) in executive remuneration incentive structures has increased fairly steeply in the past three years, but remains problematic.

Most companies we cover (80 JSE-listed companies accounting for 90% of the JSE by market cap) now incorporate non-financial KPIs in executive incentive structures.

King V: analysis of updated code on corporate governance

Since King IV was published in 2016, the way entities approach corporate governance has changed. Shifts in thinking have taken place across the globe due to high-profile corporate failures, emergence of new information technologies, growing awareness of human rights abuses and increasing focus on the need for climate-change mitigation, among others.

King V places greater responsibility and accountability on the board by standardising disclosure requirements and focusing on governance outcomes. We like the core theme of value-creation in economic, social and environmental contexts, but believe guidance on remuneration governance and board composition should be more prescriptive. Our report assists investors in assessing board governance in the context of King V.

Analysis of executive remuneration votes at AGMs

We cover approximately 80 stocks and have regularly provided detailed AGM voting recommendations on 65 of these. Over the past five years we have recommended dissenting remuneration policy votes in 69% of cases and dissenting remuneration implementation votes in 51% of cases. Our analysis of shareholder votes at AGMs showed, among other things:

• Some companies persistently ignore investor concerns
• Companies in well-regulated industries generally enjoy better support
• Remuneration policies with material governance flaws often receive less than 25% dissenting votes
• Remuneration policies have become needlessly complex and time-consuming to decipher - possibly a reason AGM votes are not an accurate reflection of remuneration governance.