•The move is among a raft of measures that the bourse is undertaking to ensure that firms are rewarded for their sustainability initiatives.
•Companies that will form part of the index will likely attract increased share price, NSE says.
The Nairobi Securities Exchange (NSE) has announced plans to unveil a new index that will enable investors to make informed decisions on the choice of companies they want to invest in.
This is based on sustainability ranking.
According to NSE chief executive Geoffrey Odundo, the move is among a raft of measures that the bourse is undertaking to ensure that firms are rewarded for their sustainability initiatives.
Odundo noted that alongside the index, they are also coming up with measurement criteria of how businesses can measure the impact of their sustainability programs.
“During sustainability reporting, we have a very specific index to measure when you want to invest in a company. You can look at what is their ranking in the main index and again what is the ranking in the sustainability index before making a decision,” he said.
The reforms will see NSE come up with artificial intelligence tools developed jointly with International Finance Corporation (IFC), which will enable the exchange to evaluate sustainability reports and rate them.
He was speaking during the release of Bamburi Cement Sustainability Report.
He said NSE is working with rating agencies to develope the tools.
"That’s why we want companies to continue doing sustainability reporting so that they can be a constituent of that index," Odundo said.
Companies that will form part of the index will likely attract increased share price, he noted.
Listed companies were last year handed a grace period of one year to familiarise themselves with the new guidelines, before commencing reporting.
However, some have been early adopters and have already embraced ESG reporting.
So far, only 11 companies listed at the NSE have released their sustainability reports.
They include Safaricom, East African Breweries, Nation Media Group, KCB Group, Kakuzi, Standard Chartered and the latest one Bamburi Cement.
This means the country is still lagging behind following the release of the ESG guidelines for listed firms in December 2021.
This follows the introduction of climate risk regulatory frameworks that will and ESG asset classes such as green bonds in the capital markets.
“If you cannot report a base survey on what you are doing you can’t actually implement it,” Odundo said.
In Kenya, there are currently 30 companies doing integrated reporting and 11 companies doing sustainability reporting.
Last listed companies were directed to publish annual sustainability reports that show investors how they deal with issues such as corruption, customers’ data privacy, and environmental impact.
NSE issued Environmental, Social and Governance (ESG) guidelines for the listed firms in partnership with Global Reporting Initiative (GRI).
It is the fourth stock exchange in Africa to embrace ESG guidance manual.
Firms had traditionally limited themselves to making financial disclosures in their annual reports, but investors are increasingly keen on learning how the companies are impacting on the environment and the wider society, corporate governance practices, and fraud mitigation.