Listed companies have been urged by the Nairobi Securities Exchange (NSE) to adopt sustainability reporting mechanisms to enhance their profitability and investment attractiveness to local and foreign investors.
Speaking during a deep dive session of the 6th edition of the Absa Africa Financial Markets Index (AFMI) 2022, the NSE Chief Executive Officer, Mr. Geoffrey Odundo said that due to the impact of the climate action agenda, investors are increasingly looking for more information around the level of Environmental, Social and Governance (ESG) compliance and 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,” says Odundo.
According to the report, Kenya ranked highest in the Market Transparency, Tax, and Regulatory Environment pillar following the introduction of climate risk regulatory frameworks and ESG asset classes such as Green Bonds in the capital markets.
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This comes on the back of regulations introduced in 2021 by the Central Bank of Kenya (CBK) requiring financial institutions to adopt climate risk guidelines to foster sustainable finance practices in the banking sector.
Speaking during the session, Absa Bank Kenya PLC’s 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 KES 2000 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 KES 1.05 billion in assets under management from KES 287 million in March,” says Omari.
Capital Markets Authority (CMA) Director in charge of Regulatory Policy and Strategy, Luke Ombara noted significant revenue growth in pooled funds such as pension schemes which have risen to KES 150 billion from KES 48 billion as of June this year while hinting at future plans by the CMA to structure a diaspora bond to boost foreign exchange liquidity.
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According to the 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.