Tag Archives: ESG

ESG requirements for Nairobi companies

The Nairobi Securities Exchange (NSE) has launched an environmental, social and governance (ESG) disclosures guidance manual for listed companies on the Nairobi Securities Exchange. 

The guidance was developed with the Global Reporting Institute (GRI) as a proactive initiative by the NSE ahead of more formal rules expected from the Capital Markets Authority (CMA). The NSE is the fourth exchange on the continent after Egypt Nigeria and Botswana to publish guidelines.

NSE board member Isis Nyong’o said 50% of exchanges worldwide have published guidelines, and there are moves to make disclosures mandatory rather than voluntary and companies will soon not be able to attract foreign funding without ESG disclosures. She said that after a grace period, the NSE will also require companies to report annually on ESG.

The guide lists benefits of ESG reporting as more effective capital allocation, access to new sources of financing from sustainability-conscious investors such as DFI’s and P/E funds, more efficiency, better regulatory compliance and better supply chains.

ESG reports are to be prepared following the GRI standards. Companies are advised to recruit ESG champions from across their organization, familiarize their teams with the ESG reporting requirements, provide resources, raise awareness, and develop management plans. They are also to map out and engage with stakeholders – both low-influence such as customers and suppliers, along with the high0influence ones who are regulators and investors.

Companies are to publish their ESG reports and seek external assurance from third-parties to enhance credibility and accuracy and can also integrate their ESG reporting with the Sustainable Development Goals (SDG) they have prioritized – whether they are in banking, investment, manufacturing, agriculture, energy & petroleum, construction, commercial & services, insurance, or telecommunications sectors.

For banks, the Kenya Bankers Association has already produced sustainable finance principles for the industry while the Central Bank has developed guides on climate risk management. Some ESG areas that banks could report on are: 

  • General measures including; governance, strategy, ethics, stakeholder engagement, business models, risk management & controls.
  • Economic measures including; financial return versus economic viability, community investments and taxes. 
  • Social measures including; working conditions, financial products information to customers, consumer protection, inclusivity, political funding, and cyber security.
  • Environmental measures including; materials sourcing, emissions, energy-choice, waste management, electronic waste management, and environmental impact assessments. 

It is expected that adhering to the ESG reporting approach can be used to meet the reporting requirements of the CMA’s corporate governance code for listed companies. Currently, ESG, as measured by sustainability reports, is largely the preserve of larger institutions including Safaricom, Bamburi (parent is Lafarge), East African Breweries (parent is Diageo) and Absa, KCB, Cooperative and Stanbic banks.

The NSE plans to have more training and capacity building sessions about the ESG guide manual which can be downloaded from their website.

Sustainable Finance by Kenyan Bankers

The Kenya Bankers Association (KBA) launched a report on the progress towards the implementation of sustainable finance in decision-making at Kenyan banks.

The KBA houses a Sustainable Finance Working Group that complies mid-level managers at Kenya banks that champions and promotes sustainable finance principles and practices among Kenyan banks. The report shows that 85% of banks have aligned their credit policies to responsible and sustainable lending practices and 57% of banks have integrated sustainability reports into their financial reporting. The results are based on voluntary disclosures by banks.

KBA also launched a revamped Sustainable Finance Initiative e-learning website that is now Persons With Disability (PWD)-friendly.

Since it was originally launched in 2015, over 99% (33,000 employees) of banking industry staff have received training on how to make more inclusive financial decisions. The bankers are trained on different modules, including on green bonds and with case-studies from other markets. The top-performing banks in SFI e-learning have been NCBA, Bank of Africa, Diamond Trust, I&M, and Sidian banks. Also, bankers can now sign in with user names, as access is no longer based on their email addresses, which created hitches when people learning switched banks.

The new platform has got case foreign and local studies on blue and green finance. Some of the ones cited in the report include the Acorn Green Bond, arranged by Stanbic and guaranteed by GuarantCo, which raised Kshs 4.3 billion for environmentally- friendly student accommodation in Nairobi. Others are CBA’s $2 million lending to M-KOPA, a seller of solar-powered devices to low income, mostly unbanked households, on a pay-to-own instalment basis and Standard Chartered’s Kshs 10 million 3-year loan to assist Uhuru Flower Farms to acquire a solar system to reduce their energy costs and improve the reliability of the power supply.

Also this week, Family Bank joined the United Nations Global Compact network, and became the 4th bank in Kenya to commit to building a sustainable business that adheres to the ten principles of the network.

The KBA sustainability study was done with support from WWF-Kenya which is also supporting the green bonds program in Kenya.