In November 2021, the Nairobi Securities Exchange released its Environmental, Social and Governance (ESG) Disclosures Guidance Manual to give directions to listed companies on how to collect, analyse, and publicly disclose important ESG data.
The manual makes boards responsible for developing and implementing appropriate policies for identifying, assessing and managing ESG-related risks and opportunities in their organisations.
Boards are also responsible for defining the sustainability reporting boundaries and establishing committees to oversee this. From November 2022 listed companies will be required to publish ESG reports annually, either separately or as part of their integrated annual reports. The topics covered will vary across industries, but there are certain elements that must be covered.
These are governance, environmental and social risk management, stakeholder engagement, regulatory compliance, supply chain screening, economic performance, taxes, anti-corruption, human rights, labour and working conditions, occupational health and safety, training and education, diversity and equal opportunity, consumer protection, data privacy, environmental compliance and emissions.
While the manual applies only to listed companies, unlisted companies are encouraged to adopt ESG reporting to take advantage of its benefits.
These benefits include enhanced access to capital, improved stability and reputation. Market trends suggest investors, financial institutions and private equity firms are increasingly targeting socially responsible or impactful investments such as green bonds.
When Acorn Holdings Limited issued Kenya’s first green bond to fund the construction of decent affordable student housing, the bond was oversubscribed by 46 percent. Additionally, we have seen financiers restrict borrowers to only using their funds for socially impactful or environmentally conscious activities.
As this trend continues, companies that have adopted ESG reporting will be more and more preferred by financiers. Whether your company is publicly traded or not, there is a significant benefit to adopting a sustainable reporting framework.
The writers are compliance experts at Qwasha Corporate Services LLP.