Emerging Environmental, Social and Corporate Governance Reporting by Listed Companies in the Post-CoronaPandemic in Kenya

Abstract

There is an emerging trend in which Kenyan securities market investors are closely scrutinizing listed firms’ sustainability efforts, not only their financial performance but also shareholder disclosures. The environmental, social and corporate governance (ESG) reporting concerns are therefore issues that are of increasing concern, over and above financial returns provided by firms listed at the Nairobi Securities Exchange. Listed firms that aspire to keep their shareholders happy, attract new investors and boost demand for their products and services can often do so by acting more sustainably and socially responsible. This not only appeases investors but also helps improve financial performance of the listed firms. Existing shareholders need to become aware of the growing push for listed firms to improve sustainability reporting and implement more environmentally friendly activities. The recent Corona pandemic has also put firms’ long-term viability and operational resilience to test. As a result, ESG issues have become even more important not just for corporate boards but also market regulators and other policymakers. This calls for an urgent need to understand how their actions affect the environment and society in order to maximize good effects and minimize negative ones. While many Kenyan listed firms have some ESG reporting initiatives, majority of them follow the limiting Global Reporting Initiative (GRI) requirements. Although the benefits of ESG reporting are well known on a global scale, doing so in Kenya is not without its difficulties. Listed firms that fail to address such hurdles risk missing out on some of the most important advantages of ESG reporting, such as opening up new capital sources from investors with a commitment to sustainability – such as from pension funds, development finance institutions, and private equity firms – as well as improving operational efficiency. Motivated by the emerging ESG corporate reporting concerns, and employing a multi-scenario documentary analysis approach, this paper first analyses the literature and examines the reasons behind the investors' concern for ESG reporting in the post Corona pandemic period. It then examines the theories underpinning ESG reporting. In addition, the paper explains the relevant sustainable financial disclosure regulation in Kenya. Moreover, it discusses the challenges and the future of ESG reporting. Finally, the paper makes key important recommendations aimed at promoting ESG reporting by listed firms as well as encouraging impact investing among stock investors in Kenya.