By Chinwendu Obienyi
The clarion calls for accelerate decarbonisation to improve social equity as well as driving tangible, impactful progress on sustainability imperatives.
This is of course a collective responsibility, with critical roles for both the Federal Government and businesses. But as our sustainability crises mount, and doubts grow over the slow pace of progress especially in a nation experiencing soaring inflation, an active role for companies and financial markets has never been more important.
Today, historic levels of capital are now shifting towards sustainability priorities. However, this has led to the increased need for more credible and useful sustainability data and reporting. Currently, trust in sustainability data is declining rather than improving as there are concerns about “green-washing” (process whereby an organization spends more on marketing itself as environmental friendly) and “green-wishing” (the fact that despite good intentions, not every action has an impact when it comes to tackling climate change).
For example, individual retail investors are concerned about whether the money they are channeling toward sustainable-labeled investment products is actually going to the companies they imagined to be part of the sustainability solution, and if so, how these companies demonstrate that they are achieving it.
There is also a disconnect between investors and corporates on the sustainability reporting that companies disclose, and whether it is central to how investors make decisions and the efficient running of capital markets. These sustainability data and reporting challenges could undermine the main hope for accelerated action on issues such as decarbonization – the mass mobilization of private capital in support of sustainable business practices.
NGX’s efforts
The Nigerian Exchange Limited (NGX) has been at the forefront of encouraging businesses to adopt sustainable business practices and report sustainability performance to stakeholders to promote inclusivity in transformational initiatives for the economy and society.
Its Chief Executive Officer, Temi Popoola, at a digital closing gong, noted that the critical roles required of the private sector in actualising the Sustainable Development Goals (SDGs) and the Paris Agreement now enjoys some clarity and as such businesses would need to incorporate environmental and social factors into their operations and activities.
He said, “we have only one earth and we all have a part to play in preserving it. For this reason, NGX created the Facts Behind the Sustainability Report platform to promote transparency in Environmental, Social and Governance (ESG) disclosures by showcasing the sustainability performance and reporting amongst companies listed on NGX”.
In developing this unique platform, the exchange’s objectives were to mainstream the adoption of sustainability reporting amongst listed companies so as to increase the availability of decision-useful ESG data that investors can utilize in making investment decisions.”
Just recently, in a bid to empower investors and stakeholders make better investment decisions as well as encourage corporates to adopt sustainability at the core value of financial reporting, the Financial Reporting Council (FRC) of Nigeria and International Sustainability Standard Board (ISSB) and NGX Regulation Limited (NGX RegCo) launched the first two IFRS Sustainability Disclosure Standards (IFRS S1 and IFRS S2 Standards).
The launch which held at the Nigerian Exchange Group House in Lagos makes Nigeria the first African country to adopt the standards. The standards were also launched in six major global financial centers namely; New York, London, Frankfurt, Singapore, Santiago and Montreal.
Speaking at the launch, the Executive Secretary, FRC, Ambassador Shuaibu Adamu, noted that the launch marks a historic milestone for Nigeria and is a testament to the country’s unwavering commitment to responsible and sustainable business practices.
The ES also said that with Nigeria adopting these standards, it is setting a powerful example for other nations and reaffirming its position as one of the global leaders in sustainability reporting.
While explaining the reason for collaborating with the NGX RegCo and the ISSB, Adamu emphasized the need for private capital as the public sector budget is insufficient for sustainable development and added that the capital market is key to the mobilization of private capital.
“Today, there is a growing global, environmental, social and governance investor base of over $2 trillion in global institutional investor funds under management. No country or institution can attract or accept these private investment capital if you are not seen to be committed to climate and sustainable development.
Nigeria must therefore compete with the rest of the world for this private capital. Obviously, in Nigeria, the NGX provides a veritable platform to attract this capital. Comprehensive, comparable and transparent information about sustainability and climate related risks and opportunities will play an essential role in appropriately pricing sustainability related risk and opportunities to unlock the needed private capital flows.
The standards will deliver a common global language of sustainability disclosures, enhancing the communication between companies and investors. They will help support the mobilization of green finance in emerging markets and provide greater transparency when determining where or when to invest”, Adamu said.
Also speaking, the Chief Executive Officer, NGX RegCo, Ms Tinuade Awe, said that the launch is tremendous for the growth of the capital market as companies in Nigeria will now have a global baseline that it can use.
Awe, while calling for focus on the forthcoming standards, stated, “NGX RegCo remains committed to promoting a fair, transparent and orderly market that thrives on full and timely information needed for the protection of investors in the Nigerian capital market”.
In her remarks, Board Member, at ISSB, Ndidi Nnoli-Edozien, said that ISSB was born at COP 26 as a sister entity to the international accounting standard board while noting that its intention to launch the standards is to see how Nigeria take sustainability, climate related risk and embed them in investments so to help guide capital flows.
“There are close to 300 different standards and what we have done is create a single global baseline that is interoperable with standards such as GRI and reduce the cost of reporting burden”.
In a goodwill message, the Director-General, Securities and Exchange Commission (SEC), Lamido Yuguda who was represented by the Executive Commissioner, Operations, Dayo Obisan, said the launch of the ISSB Standards in Nigeria signals the country’s readiness to embrace sustainability as a core value in financial reporting practices.
According to Yuguda, this sends a strong message to the global community that Nigeria is committed to transparent and responsible business practices that prioritize environmental stewardship, social well-being as well as good governance.
The Director, Directorate of Accounting Standards, (Public Sector) of the FRCN, Dr. Iheanyi Anyahara, commended the joint efforts of the organizers to ensure that Nigerian companies are prepared to early adopt the ISSB Standards when they become effective. Additionally, Dr. Anyahara stated that the FRCN has inaugurated the Adoption Readiness Working Group (ARWG), which will make recommendations to the FRCN on the adoption of the IFRS Sustainability Standards in Nigeria.
Experts’ views
Reacting to the launch, Mrs Adekemi Adisa, General Manager, Sustainability & Shared Value, MTN Nigeria Plc, (a member of the ARWG), noted that “investors are increasingly demanding reporting on the environmental, social and governance risks affecting the companies they invest in. So sustainability reporting is a critical tool for unlocking the capital that companies need.”
Further, she stated that “MTN is an early adopter of the IFRS sustainability standards, which is why I can attest to the fact that the decision of FRC, ISSB and NGX RegCo to launch this is laudable, and a significant building block to keep Nigerian companies’ attractive recipients of global capital inflows for now and the future.”
Mrs. Chinomso Nwachukwu, CFO, Nigeria, Interswitch Limited, (a member of the ARWG), maintained that “One of the biggest issues faced by companies with diverse groups of investors is the alignment in reporting standards requirements across the various stakeholders and the attendant burden of compliance in such a situation.
The release of IFRS S1 and S2 by the ISSB is a huge relief and would go a long way in addressing this issue for these companies. The ISSB’s initial training on industry based disclosures was quite useful and provided clarity and insight for me personally on how to embark on this journey. For companies looking to unlock capital flow and who also have aspirations to play globally, this is something that should be embraced as it has come to stay.
I am glad to see Nigeria stepping up and working to come up with a road map for adoption. This is a welcome development and I am glad that these conversations are happening now rather than later.”