USE begins drafting ESG in listed companies’ reporting frameworks

This was revealed during the first consultative meeting in Kampala on Wednesday, which drew representation from International Finance Cooperation, the private sector lending arm of the World Bank, retail and institutional investors, listed companies, fund managers, brokerage firms, and multinational ESG consultants.

Mr Paul Bwiso, the USE chief executive officer, said the guidelines focus on reporting metrics such as carbon footprint, energy efficiency, waste management, water use and biodiversity impact.

Other focus areas include social metrics on labour practices, community engagement, product responsibility and human rights and governance metrics that focus on board composition and representation, ethics and transparency, shareholder rights and executive compensation.

The metrics are often assessed using ESG rating systems and USE has particularly partnered with the Global Reporting Initiative (GRI) to assess local companies' sustainability reporting.

“We want to ensure that we attract more finance in capital markets, especially for listed companies to ensure that investors appreciate the work being done,” said Mr Bwiso.

ESG principles in Uganda are still in their infancy, with few formal structures to guide compliance.

However, on the global stage, the world has shifted toward sustainable investing, which has seen increased adaptation, especially in banking and insurance.

But the USE is likely to ace a challenge in implementing the standards, given the diversity of the listed companies, which might necessitate a unified ESG framework. 

The USE has two listed telecoms, three product manufacturers, three banks, a media company, a power distributor and an insurance company.

However, Mr Bwiso said the Capital Markets Authority had already gazetted certain regulations around green financing and ESG, in addition to which, USE would develop “thematic bond regulations or rules to ensure that we provide guidance to companies that want to raise capital”.

This is not just beneficial to the USE but also for the broader economy, as government looks at implementing the tenfold growth of the economy from $50b to $500b by 2040.

The Ministry of Finance envisions this growth by focusing on long-term patient capital to boost sectors such as agriculture, tourism, manufacturing, and technology.

Mr Bwiso said an ESG framework will attract a new pool of investors, particularly those focused on green financing and sustainability.

Ms Josephine Okui Ossiya, the CMA chief executive officer, said last week's Capital Markets for Economic Development Forum that there was big potential in the fixed income market, including government and corporate bonds, in driving large-scale infrastructure, industrialisation, and energy projects.

She pointed out that globally, these instruments are crucial in mobilizing resources for such projects.

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