By Nneka Nwogwugwu
East African banks are under pressure from financial regulators to integrate environmental, social and governance (ESG) issues in their operations.
At a virtual seminar convened by audit firm KPMG, participants agreed ESG is swiftly shifting from a moral responsibility to a mandatory legal requirement.
“ESG is not just a reputational issue, but also a financial risk,” said Tracy Lane, associate director of climate, renewable energy and resilience at KPMG East Africa.
The stakeholders say integrating ESG across organisations means working towards positive environmental and social impacts in the community while actively reducing any negative impact a business may have on its social and physical surrounding.
The latest regulation on ESG is the Guidance on Climate Related Risks issued by the Central Bank of Kenya in October 2021, mainly requiring commercial banks to “embed the consideration of the financial risks from climate change in their governance arrangements.”
The guideline also requires banks to include the financial risks from climate change in their risk mitigation strategy and to design a clear way of reporting on such perils.
Nairobi Securities Exchange followed suit in November, releasing the ESG Disclosures Guidance Manual that guides listed firms in Kenya on how to collect, analyse and report ESG information.
In Kigali, the National Bank of Rwanda, through the Regulation No 28/2019 of 2019, requires banks to prepare an overall report that explains the link between their financial performance and their social, environmental and economic impact.
The Dar es Salaam bourse in 2016 joined the United Nations Sustainable Stock Exchanges Initiative, an international lobby that champions performance on ESG issues among listed firms, signalling its commitment to promote ESG concerns.
Source: The Citizen
