NSE Joins UN Sustainable Stock Exchange Global Initiative

Nairobi Securities Exchange trading floor. PHOTO | NMG

By BRIAN NGUGIA
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Overview

• The UN-backed voluntary commitment promotes long-term sustainable investment and improved disclosure and environmental, social and governance performance among issuers.
• The NSE launched its derivatives market in 2019 in an effort to diversify its portfolio and increase traded liquidity.
• The NSE has taken a number of initiatives to promote the use of Environmental, Social and Governance (ESG) principles in listed companies.

The Nairobi Securities Exchange (NSE) #ticker:NSE has joined the Sustainable Stock Exchange (SSE) derivatives exchange network, which aims to promote sustainable development through its derivatives market.

The UN-backed voluntary commitment promotes long-term sustainable investment and improved disclosure and environmental, social and governance performance among issuers.

“The NSE has made a commitment to support a sustainable economy through several strategic interventions,” CEO Geoffrey Odundo said in a statement.

“We are keen to introduce commodity derivatives that specifically align with sustainability goals, such as those supporting the transition to a low-carbon economy.”

The NSE launched its derivatives market in 2019 in an effort to diversify its portfolio and increase traded liquidity.

Derivatives are an investment instrument whose value is derived from an underlying asset such as bonds, commodities, currencies, interest rates, market indices and stocks based on the asset’s expected future price movement.

The NSE has taken a number of initiatives to promote the use of Environmental, Social and Governance (ESG) principles in listed companies.

Companies’ rush to improve their ESG policies is driven by investors who are increasingly interested in the companies’ impact on the environment and wider society, corporate governance practices and fraud prevention.

The NSE issued ESG guidelines for listed companies in October last year in conjunction with the Global Reporting Initiative, becoming the fourth exchange in Africa to launch such a handbook.

Under the guidelines, publicly traded companies are now required to publish annual sustainability reports that show investors how they deal with issues such as corruption, customer data privacy and environmental impact.

The ESG reporting is integrated in the regular annual reports or in separate sustainability reports. Listed companies are given a one-year grace period to familiarize themselves with the new guidelines before reporting.

The disclosures are expected to increase transparency around publicly traded companies, opening up new investments, especially from international investors.

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