Taking stock of sustainability

Africa’s stock exchanges have a vital role to play in helping listed companies get to grips with reporting on environmental, social and governance issues.

When attention turns to sustainability reporting and stock exchange requirements, the Johannesburg Stock Exchange (JSE) will be guaranteed to feature. Not just a beacon in Africa, the JSE is a world-leading stock exchange when it comes to the promotion of reporting on environmental, social and governance (ESG) matters. Sustainability reporting first entered the corporate governance code for listed companies in 2002, and since 2010 the JSE has required them to produce, on a ‘comply-or-explain’ basis, integrated reports that include sustainability and governance information.

But what about the rest of Africa and in particular sub-Saharan Africa? Stock exchanges in other countries are not as far along their ESG reporting journey as the JSE, but some have taken their first steps.

‘There is clearly a lot of interest in sustainability reporting in sub-Saharan Africa,’ says Rachel Jackson, head of sustainability at ACCA. ‘There is also evidence of considerable intent to take some form of action to encourage or require listed companies to provide information on sustainability issues. It is important to keep the spotlight turned on developments across the region, and not just focus on South Africa, which for a long time has been a leader in the governance and sustainability reporting field.’

Strong intent

As noted in a new ACCA report, Sustainability reporting: stock exchanges and listed companies in sub-Saharan Africa, four countries in particular are showing strong intent in relation to encouraging or requiring sustainability reporting by listed companies: Nigeria, Ghana, Zimbabwe and Mauritius.

In October 2013 the Nigerian Stock Exchange (NSE), Africa’s second largest after the JSE, joined the United Nations-backed Sustainable Stock Exchanges Initiative, which is exploring how exchanges can work with investors, regulators and companies to enhance corporate transparency – and ultimately performance – on ESG issues. The NSE has not yet introduced any voluntary guidelines or mandatory requirements, but it does provide support on corporate governance issues.

There are also early signs of ESG reporting activity in Ghana, one of West Africa’s top-performing economies, with large listed companies operating in a variety of sectors such as energy, mining, telecoms, pharmaceuticals and professional services. The Ghana Stock Exchange (GSE) sees sustainability reporting as a means of ensuring that the country remains a leading and competitive economy, and initiated plans to develop a framework in June 2013. Alongside this, the GSE and ACCA are planning to run a series of training programmes for CFOs of listed companies.

Progress is more advanced in Zimbabwe, where the Zimbabwe Stock Exchange (ZSE) began consulting with stakeholders in November 2013. It proposes amending listing requirements to include a requirement to report on ESG practices and performance, encouraging listed companies to apply the reporting framework developed by the Global Reporting Initiative (GRI), which provides metrics and methods for measuring and reporting sustainability-related impacts and performance. It is not clear when such requirements could come into force, but there does seem to be momentum behind the initiative. The Zimbabwean government has recognised the benefits of greater corporate transparency in attracting foreign investment, citing the JSE as a good example to follow.

‘Mandatory sustainability reporting in upcoming new listing requirements has the potential to attract foreign investors, improve corporate behaviour and improve sustainable business practices towards a sustainable stock exchange,’ says Rodney Ndamba ACCA, CEO of the Institute for Sustainability Africa; he is also a member of ACCA’s Global Forum on Sustainability, a stakeholder council member (Africa) at the GRI and a member of the ZSE’s listings sub-committee. ‘So far, the number of companies considering sustainability reporting on a voluntary basis is rising. Some have already registered sustainability reports with the GRI database.’

Ndamba sees the potential for stock exchanges to play a key role across the African continent. ‘In Africa, stock exchanges have great potential to drive sustainability reporting by ensuring that it is part of exchange requirements and the reports are assured,’ he says. ‘Capital markets regulators, governments and investors could drive action to require ESG reporting.’

There are also interesting developments at the Stock Exchange of Mauritius (SEM), which is working to create a sustainability index, drawing on the GRI’s reporting framework. The SEM has also joined with Impact Exchange Asia (IIX) to launch the Impact Exchange trading platform focused on connecting social enterprises with investors. It operates under SEM’s regulatory framework, with IIX providing oversight of the environmental and social requirements and obligations of companies listing on the platform.


Interest in sustainability reporting also exists elsewhere in sub-Saharan Africa. Kenya is conducting a review of its corporate governance regime, involving the country’s Capital Markets Authority. ‘One of the likely recommendations will be proposals on the timetable and transition process towards the adoption of sustainability reporting in the country,’ says Paul Muthaura, the authority’s acting CEO.

There is also willingness for exchanges to promote sustainability reporting. ‘The exchange can act as a catalyst in the development of guidelines on sustainability reporting,’ says John Robson Kamanga, COO of the Malawi Stock Exchange. ‘This could be done if the exchange can be availed with the knowledge on sustainability reporting. The exchange can also act as trainer and promoter of the ideals.’

It seems likely that pressure for more sustainability reporting in Africa will rise; indeed, says Ndamba, it ‘is increasingly becoming an instrument for investment appraisal and risk assessment by investors seeking safe investment options in Africa. The rising influence of stakeholders demanding sustainability information, particularly communities, civil society and governments, is driving sustainability reporting.’

That many exchanges in sub-Saharan Africa are relatively new by international standards need not be a barrier. ‘A stock exchange need not be well established to have sustainability reporting within its listing requirements,’ says Tom Kimaru, manager, compliance, at the Nairobi Stock Exchange. ‘This is a global trend and therefore should enable investors globally to make prudent judgments through such comparisons. In this regard, any opportunity to have sustainability reporting in the listing requirements is highly encouraged.’

It is important to maintain and spread the momentum that now exists in sub- Saharan Africa behind corporate reporting of sustainability issues. ‘There is no reason why stock exchanges in Africa shouldn’t be moving ahead with sustainability reporting,’ says Jackson. ‘They have the opportunity to take leading roles in developing reporting practice and derive long-term benefits for their economies. If companies are required to measure and manage their environmental and social impacts and report on their governance procedures, this should support their long-term stability. The stock exchanges on which they are listed then become less volatile, which attracts investors. The result is a positive cycle of business development and investment.’

Sarah Perrin, journalist


This article first appeared in ACCA's Accountancy Futures journal, issue 9, September 2014.