The Nairobi Securities Exchange (NSE) #ticker:NSE has joined the Sustainable Stock Exchange (SSE)’s derivatives exchanges network, looking to promote sustainable development through its derivatives market.
The UN-backed voluntary commitment promotes long-term sustainable investment and improved environmental, social and corporate governance disclosure and performance among its issuers.
“The NSE made a commitment to support a sustainable economy through undertaking various strategic interventions,” said chief executive Geoffrey Odundo in a statement.
“We are keen on introducing commodity derivatives that specifically align with sustainability objectives, 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 boost traded liquidity.
Derivatives are an investment tool whose value is derived from an underlying asset like bonds, commodities, currencies, interest rates, market indexes and stocks based on the expected future price movement of the asset.
The NSE has been putting in place a number of initiatives to promote the use of Environmental, Social and Governance (ESG) principles among listed firms.
The rush by companies to improve their ESG policies has been driven by investors being increasingly keen on how the companies are impacting the environment and the wider society, corporate governance practices and fraud mitigation.
The NSE last October issued ESG guidelines for the listed firms in partnership with Global Reporting Initiative, becoming the fourth stock exchange in Africa to launch such a manual.
Under the guidelines, listed firms are now required to publish annual sustainability reports that show investors how they deal with issues such as corruption, customers’ data privacy and environmental impact.
The ESG reporting will be integrated into the normal annual reports or in separate sustainability reports. Listed companies will have a grace period of one year to familiarise themselves with the new guidelines before commencing reporting.
The disclosures are expected to enhance transparency around listed firms, helping unlock new investments, especially from international investors.