Kenya up two places in Absa markets index on ESG reporting

Listed and non-listed companies should expect tighter disclosure and compliance requirements with regard to ESG disclosures. FILE PHOTO | SHUTTERSTOCK

Kenya has jumped two places in the annual Absa Financial Markets Index, helped by the enhancement of environmental, social, and governance (ESG) reporting in the financial sector.

Absa said in the index report released Thursday that improving market transparency, tax, and regulatory environments in capital markets boosted Kenya’s ranking to eighth out of 26 African markets this year compared to 10th last year from a list of 23 countries.

The country returned a score of 61 out of 100, up from 55 last year, tied with Uganda (up from 60 points to 66) for the second highest points jump this year, and only behind Namibia’s seven-point jump to 65.

The pan-African lender said Uganda ranked highest in East Africa at fourth place, up from sixth place last year, helped by efforts by the country’s monetary regulator to stabilise foreign exchange rates and introduction of long-term plans to transform the capital markets and economy by adopting international standards.

“Namibia, Uganda and Kenya are among the countries with the greatest increase in scores. They have bolstered their environmental, social and governance market frameworks and, in Kenya, climate risks have been incorporated into financial stability regulation,” said Absa.

The Absa index, now in its sixth year, evaluates financial development in subject countries based on measures of market accessibility, openness and transparency.

Scores are determined by performance across six key pillars namely market depth, access to foreign exchange, market transparency, tax and regulatory environment, the capacity of local investors, macroeconomic environment and transparency and legal standards and enforceability.

While Kenya scored highly on market transparency, tax and regulatory environment (88 points), it performed poorly on the capacity of local investors at just 20 points.

Kenya has been enhancing its ESG reporting standards, with the financial sector firms among the most proactive in publishing reports and information on the measures they are taking to promote sustainable financing practices.

Regulators have also enhanced the ESG reporting framework. Last year, the Central Bank of Kenya issued lenders guidance on climate-related risk management, allowing them to integrate climate-related risks into their governance, strategy, risk management and disclosure frameworks.

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Note: The results are not exact but very close to the actual.