Nigerian companies have been urged to implement sustainability policies of environmental, social and governance (ESG) to respond to increasing investor demand.
The call was made by the Chairman of Bond Forum and Capital Markets Pathway Qualifications Assessment Board of the Chartered Institute for Securities & Investment (CISI) in the United Kingdom, Neil Brown.
Brown made the call while speaking as a keynote speaker at a webinar organized by the Chartered Institute of Stockbrokers (CIS) in partnership with CISI.
Need to embrace sustainability: He listed some benefits of sustainability, a major tool deployed by portfolio managers, asset managers and other investment advisers to recommend profitable companies for their clients.
Delivering a paper entitled ‘Sustainability in Nigeria’s economy, Capital Markets and Investment Products’, Brown explained that companies should embed sustainability in their business both to capture positive investment performance as well as offset the negative effects of environmental challenges and promote good governance and community relations.
According to him, companies should also collaborate with stakeholders to raise awareness, build capacity and promote action on sustainability.
New opportunities: Specifically, Brown advised that companies should identify new opportunities whilst embedding sustainability considerations into their business to avoid, minimise or offset negative impacts.
- “They need appropriate governance, policies and audit to promote community relations, collaborate with stakeholders to raise awareness, build capacity, manage risks, develop solutions promote finance of priority sectors and report the value of investments made and support received,” he said.
He stated that regulators would expect companies to be transparent on their sustainability credentials as real actions can be under-reported through green-washing tactics and their variants, including, green-crowding, green-lighting, green-shifting, green-labelling, green-hushing, green-lobbying and green-wishing.
What drives investors: Brown noted that physical and transition risks would drive changing valuations for sectors and stocks and warned investment advisers that:
- “They should understand what drives their clients. Some investors may be driven by part or whole of sustainability. Investment advisers must look for a measure that matches their clients’ objectives. They should also beware of misleading scorecards. There could be strong ESG scores because of bad impacts and weak ESG scores despite good impacts.”
The essence of compliance: The Head of Education and Training, CIS, Chukwudi Nga, explained that the webinar was one in the series of Mandatory Continuing Programme Development (MCPD), designed to upskill the members of both CIS and CISI this year to enhance their professional practice. He said:
- “Companies in Nigeria are aware of the essence of compliance with ESG. There are laws on sustainability in the Nigerian Constitution. The webinar was organised as part of the Mandatory Continuing Programme Development for securities and investment professionals.
- “The CISI and CIS have a long-standing collaboration focused on education and continuing professional development. Sustainability and the role that the financial services profession has to play in the route to net zero is now a crucial topic for investors and businesses globally. Opportunities to enhance our learning in this important ESG area are essential and it was a pleasure to partner with the CIS for this event,” said Helena Wilson Chartered MCSI, CISI Assistant Director, Global Business Development.”