Environmental, social and governance (ESG) practices are increasingly influencing capital allocation decisions as investors move beyond financial performance to consider risk-adjusted returns. As a consequence of this shift, disclosures relating to these practices, referred to as ESG disclosures are gaining traction especially amongst listed companies.

In Kenya, companies such as KCB Group, Safaricom Plc, EABL, Holcim Group and Equity Group Holdings have for many years developed and articulated ESG strategies and reported on their implementation. To date, the reports have been voluntary with each company designing its approach to the ESG disclosures. Some companies have adopted global ESG reporting frameworks such as the Global Reporting Initiatives Sustainability Reporting Standards, 2018 (GRI Standards) and the Sustainability Accounting Standards Board (SASB).

The Nairobi Securities Exchange (NSE) has early this week taken the critical step of publishing an ESG Disclosures Guidance Manual (The ESG Manual) for Kenya’s listed companies. The ESG Manual provides detailed guidance on the implementation of ESG metrics in organisational strategy, as well as collection, analysis and reporting of ESG performance. It will enhance consistency, comparability, and credibility of the ESG disclosures by listed companies. The ESG Manual will also raise the standards of reporting on ESG practices by companies listed on the NSE thereby enhancing the competitiveness of our capital markets.

The ESG Manual is aligned with the Capital Markets Authority’s Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015 which requires boards of listed companies to have formal strategies to promote sustainability by addressing ESG issues that are material to the company’s business. Listed companies have until 29 November 2022 to comply with ESG disclosure requirements. This will require boards of listed companies to move quickly to understand the ESG disclosure requirements and assess their readiness to comply by 29 November 2022.

Alex Tamlyn, Partner and Head of Capital Markets EMEA (and Co-chair Boardroom Advisory Services), DLA Piper in an article titled Beyond Woke: Acting NOW on SESG recognizes that the inertia around ESG stems from profound uncertainty about what to do and how to do it. He advises businesses that to reap the benefit of ESG disclosures demands that they develop bespoke strategies reflecting their competencies and operationalize them. Then reporting becomes easy. He emphasizes what he dubs the Rule of Three: Materiality, Advocacy and Authenticity.

Please find the ESG Manual here and the article from Alex here.

For more information, please contact: , please contact: Kamami Christine Michira and Michael Okeyo.