Profit shouldn’t come at the cost of people or the planet — and the Financial Sector Conduct Authority (FSCA) is making that clear. The regulator is steering the financial sector toward a more sustainable future, setting clear benchmarks for green investments and aligning with global standards. Change isn’t mandatory yet, but the message is: sustainability is key to long-term financial success.
In an era where profit without purpose is increasingly unsustainable, South Africa’s financial sector is facing a critical imperative: integrate or be left behind. Just as other industries have had to adapt to the rising tide of environmental and social consciousness, banks, investment houses, and insurers must now embed sustainability into their core.
The FSCA is playing a crucial role in steering this shift, and the recently released Sustainable Finance Update Report for 2025 provides insightful points on where things are headed.
Recap: The journey so far
This isn’t the FSCA’s first step in the sustainable finance space. Initial guidance was shared in 2023, followed by a formal roadmap in 2024. The 2025 update outlines what’s been achieved so far and where the FSCA is now focusing its attention. The overall aim remains clear: to ensure that the financial system in South Africa contributes positively to long-term social, environmental, and economic outcomes.
Defining what “green” really means
One of the most significant initiatives currently under way is the Green Finance Taxonomy (GFT) Pilot Project. This pilot is essentially about creating a common understanding of what qualifies as a “green” investment product. Without a shared standard, it becomes too easy for companies to label their investment offerings as environmentally friendly without substance, also known as greenwashing.
Here’s what the project involves:
Objective: Testing the draft taxonomy with financial institutions to determine how easily they can classify their products and investments using the proposed criteria.
Participants: Eleven major financial institutions are participating in the pilot and providing feedback to the FSCA.
Next Steps: The results of this pilot are expected within the next two months and will guide how the taxonomy is refined and implemented going forward.
What this means for your business: The outcome of this project may influence how investment products are labelled and marketed. Businesses will need to ensure they can substantiate any sustainability claims made about their financial offerings. You can also expect industry regulators, funders such as banks, as well as investors such as asset managers, pension funds and insurers wanting more detailed information about ESG performance and disclosure.
South Africa’s global contribution
Through its involvement in the G20’s Sustainable Finance Working Group, the FSCA is engaging with international efforts to shape the future of green finance. This work includes:
Strengthening global frameworks: Encouraging alignment and clarity across countries on sustainable finance standards.
Climate adaptation funding: Exploring ways to finance national responses to climate challenges such as droughts and extreme weather events, with a focus on fairness and equity.
Carbon markets: Investigating the potential of carbon credits and emissions trading as tools to support environmental goals.
Why this matters: Global discussions often influence local regulation. Business in South Africa should stay informed, as international agreements may shape domestic expectations and reporting requirements. For example, the Task Force on Climate-related Financial Disclosures (TCFD), an international framework guiding climate-related financial disclosures, has been adopted or referenced in regulations across multiple countries. The FSCA has encouraged alignment with TCFD principles, meaning that companies may increasingly be expected to assess and disclose climate risks in a structured and transparent way.
Building awareness and understanding
Beyond policy, the FSCA recognises that a well-functioning and trustworthy sustainable finance market needs consumers who are well-informed. To that end, there are efforts underway to improve transparency and accessibility of green finance information.
Implications for businesses: As public understanding improves, customers may begin to expect more transparency and choice when it comes to sustainable investment options. Financial service providers should be prepared to communicate clearly and credibly.
Looking ahead: A thoughtful approach to regulation
Major regulatory changes may not arrive all at once, but the direction is clear. Sustainability is becoming a central part of the financial landscape in South Africa. This is not just about checking boxes. It is about building real and lasting value in a way that is thoughtful and responsible.
Businesses that will thrive are those that recognise the broader context. A healthy environment and a stable society are essential for long term financial success. Ignoring this shift is not only short sighted, but it also means missing out on meaningful opportunities for growth and leadership.
Author: Oracle Ningiza, ESG advisor
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