A call for inclusivity in financial reporting standards

The practice of sustainability has gained momentum over the past 2 decades. Various global standards setters have constructed globally accepted standards with an intention of ensuring that financial reporting is inclusive of the risks and opportunities presented by a company’s sustainability practices, or lack thereof.

In fact, over the past five years, we have witnessed the formulation of national ESG laws and regulations in many parts of the world, the creation of sustainability indices in various stock exchanges, ESG instruments as well as ESG Guidelines, some of which have become compulsory in the listings requirements. Of late, ESG ratings are also being widely published – solicited and unsolicited. This goes to show that ESG reporting is core to doing

business and cannot be overlooked.

In 2016, the BSE became a Partner in the UN-backed Sustainable Stock Exchanges (SSE) Initiative, which has 87 Partners globally - and 14 in Africa [the BSE was the 11th Partner in Africa]. The SSE’s mission is to provide a global platform for exploring how exchanges, in collaboration with investors, companies (issuers), regulators, policymakers and relevant international organizations, can enhance performance on ESG (environmental, social and corporate governance) issues and encourage sustainable investment, including the financing of the UN Sustainable Development Goals.

By so doing, we made a commitment that we voluntarily commit, through dialogue with investors, companies and regulators, to promoting long-term sustainable investment and improved environmental, social and corporate governance disclosure and performance among companies listed on our exchange. Subsequently, in 2018, we became the 3rd stock exchange in Africa to publish a Guide for Listed Companies on Reporting ESG Information to Investors which was based on an ESG Reporting Model developed by the SSE Initiative.

These are Voluntary Guidelines and are not part of the BSE Listings Requirements. Currently, there are 71 stock exchanges that have published the ESG Disclosure Guidelines – 96% of which reference the Global Reporting Initiative (GRI) Standards. Our current ESG Guidelines reference the GRI Standards, Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC).

As you are well aware, standards evolve over time. New ones emerge and existing ones also converge. We have conducted various training and awareness workshops on ESG – with various local and international partners as a way of raising awareness about the importance of ESG Reporting and the tools available to facilitate it.

Further, we conducted a market survey in 2022 to gauge the extent to which our existing Guidelines have been adopted, and whether they are recommendations for improvement. Indeed, the respondents largely appreciated the usefulness of our Guidelines but highly recommended a review of the same to reflect the evolving, the current and future standards in so far as ESG Reporting is concerned.

In November 2019, the GRI and the African Securities Exchanges Association (ASEA) signed a collaboration agreement aimed at enhancing the integration of ESG issues and disclosure within capital markets in Africa. Under the partnership, GRI supports the development of ESG Disclosure Guidelines by participating ASEA member exchanges, and the training and capacity building of listed companies on sustainability reporting.

Through the support extended by its governmental partners namely, the Swiss State Secretariat for Economic Affairs (SECO) and or Swedish International Development Cooperation Agency (SIDA), GRI will support the delivery of the new BSE ESG Disclosure Guidelines and related activities, including the consultant fees and events costs.

Therefore, the BSE is very proud to be benefitting from this international partnership in producing the new ESG Guidelines, which will extensively reflect the various globally recognised standards as well as newly published sustainability standard by IFRS and the EU. The usage of these standards will help our listed companies position themselves to be globally competitive by embracing the ESG performance.

As to whether the Guidelines will form part of the BSE Listings Requirements – is not yet decided and will depend largely on deliberations from such forums as this which are on the work plan. Today’s workshop is the first milestone of the work plan that will deliver this project.

I am pleased that the consultancy that is facilitating this project has embedded in it some elements of local empowerment – as it is a joint partnership between Incite (South African based firm) and Wise Leadership (from Botswana).

I therefore take this opportunity to wish the Consultants good luck and a fruitful day today. I also wish to thank you for making time to attend this Market Sensitization Workshop which is aiming at soliciting inputs from yourselves and experts and market practitioners, advisors and users of the Guidelines in order to ensure that the final output will be an instruments that you will find useful and will readily adopt and put into practice.

*Thapelo Tsheole is CEO of Botswana Stock Exchange. He was speaking at a recent BSE Global Reporting Initiative(GRI) market sensitisations workshop hosted this week.