Calls intensify for listed firms to step up on sustainability reporting
A little over 20 years ago, sad reports of thousands of under-age workers hired by western clothing giants saw big firms severe contracts with Cambodian suppliers.
A BBC expose uncovered appalling conditions in sweatshops used by Nike and Gap in the Southeast Asian country prompting even the United Nations to protest.
Fast forward to 2022, many companies have learned the lessons and are less likely to produce their products in such dehumanizing conditions.
However, for leading companies, the question of running sustainable investments is increasingly gaining relevance among investors and other stakeholders.
“There’s a direct correlation between Environmental, Social and Governance (ESG) compliance and profitability. Stakeholders and investors are increasingly being drawn to organizations that care about them,” said Dr Geoffrey Odundo, CEO of Nairobi Securities Exchange while calling on listed companies to embrace sustainability reporting.
Dr Odundo said that due to the impact of the climate action agenda, investors are increasingly looking for more information about a company’s level of ESG compliance as well as the asset allocation in listed companies.
“We have provided listed companies with an ESG compliance manual to guide them as they adopt regular sustainability reporting. Embracing these measures enhances their overall investment profile,” explained Dr Odundo.
He was speaking during a forum on the sixth edition of the Absa Africa Financial Markets Index (AFMI) 2022.
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Kenya ranked highest in the Market Transparency, Tax and Regulatory Environment pillar of the index following the rollout of climate risk regulatory frameworks and ESG asset classes such as Green Bonds in the country’s capital markets.
This comes on the back of regulations introduced last year by the Central Bank of Kenya (CBK) requiring financial institutions to adopt climate risk guidelines to foster sustainable finance practices in the banking industry.
Sustainability reporting requires companies to go the extra mile and examine the overall impact of their activities, assessing their ability to monitor and respond to emerging externalities that have a bearing on the long-term viability of the enterprise.
Absa Bank Kenya Interim CEO, Yusuf Omari reported notable growth in the performance of the Absa collective investment schemes such as the Absa Gold Exchange Traded Funds (ETF), currently trading at an all-time Kes2000 per unit, as well as the Absa Unit Trust money market funds.
“We have also recorded the fastest growth in the collective investment scheme sector in the quarter ending June, hitting Kes1.05 billion in assets under management from Kes287 million in March,” explained Mr Omari.
Capital Markets Authority (CMA) Director in charge of Regulatory Policy and Strategy, Mr Luke Ombara noted significant revenue growth in pooled funds such as pension schemes which have risen to Kes150 billion from Kes48 billion as of June this year while hinting at future plans by the CMA to structure a diaspora bond to boost foreign exchange liquidity.
According to the 2022 AFMI index, Kenya recorded the highest growth in access to foreign exchange with an increase of 29 basis points, ranking fifth out of the 26 African countries that were assessed in this year’s AFMI report.
Overall, Kenya moved up two places to rank eighth, having scored 61 points up from 55 points in a similar period last year.
Like the thousands of Cambodians who lost their jobs in 2000, financial markets are left short of the funds they need to thrive when investor interests are not adequately addressed.