Sustainability Reporting Now Key Compliance Issue for Banks, Others, Says Olowo

James Emejo in Abuja

The Executive Secretary/Chief Executive, Financial Reporting Council (FRC) of Nigeria, Dr. Rabiu Olowo, yesterday declared that amid the impending negative effect of climate change, sustainability reporting was becoming a key compliance issue for banks and other financial institutions.

He spoke at the opening of the practical workshop on the implementation of the International Sustainability Standards Board’s (ISSB) IFRS and IFRS S2 by financial institutions in Nigeria, which was organised by the council in collaboration with the Nigerian Integrated Reporting Committee (NIRC) in Abuja.

He said while Environmental, Social and Governance (ESG) principles required everyone to act, it was, “not only a business decision or a nice to have but it is becoming a compliance issue, which every company is expected to comply through cultural behavior.”

Olowo said the ESG remained an essential aspect of responsible banking and finance, adding that as a regulator in the financial reporting and corporate governance, the FRC had been proactive in the standard setting process of ISSB’s sustainability reporting from the onset.

He explained that in the roadmap document, the Adoption Readiness Working Group (ARWG) for sustainability reporting in Nigeria, had given regulatory discretionary reliefs with phased implementation plans of sustainability standard from 2023 through 2030 for reporting and assurance instead of ISSB’s effective date of 2024.

He added, “We are delighted to note that we have two banks among the financial institutions that are early adopters.

“We therefore, look forward to having more to join the train this year and not wait for the mandatory year.”

He said the workshop was the first in a series of capacity building for stakeholders in furtherance of the council’s resolve to ensure that financial institutions become the first to know their onions when it comes to sustainability reporting before the mandatory period.

Specifically, Olowo said the FRC expected best practices in integrated reporting, combining financial and sustainability performance as well as materiality assessment, focusing on significant ESG issues, including stakeholder engagement, involving customers, employees, and communities among others.

He further explained that sustainability reporting refers to the practice of organisations disclosing their ESG performance and impacts caused by organisation’s everyday activities.

According to him, the concept focuses on disclosure to the various stakeholders on how the effects of, “actions taken in the present upon the options that are available in the future.”

He said for financial institutions, sustainability reporting remained crucial –  enabling them to demonstrate their commitment towards responsible banking principles, sustainable practices, risk management and sustainable finance opportunities.

He stressed that globally, financial institutions are forerunners on sustainability issues as they always face increasing pressure from stakeholders, including investors, customers, and regulators to disclose their sustainability performance.

He said sustainability reporting provides immense benefits to entities including improved stakeholder trust; and cost saving from energy transition on tje long run from non- renewable energy to renewable energy through expense reduction.

According to him, other benefits include tax saving from qualifying capital expenditure of PPE through capital allowance reliefs and enhanced reputation for complying organisations.

He also said compliance would help identify and address sustainability risks and opportunities which can reduce financial risks and improve long- term resilience.

In addition, he said this would further boost access to capital as investors increasingly consider ESG factors when making investment decisions, and sustainability reporting can provide essential information.

He noted that the Central Bank of Nigeria (CBN) had introduced guidelines for the Nigerian Sustainable Banking Principles to encourage banks to disclose their ESG performance while the Nigerian Exchange Group (NGX) also launched a Sustainability Disclosure Guidance for listed companies.

He explained, “The good news of these arrays of sustainable frameworks and guidelines is that there is a general awareness that action is urgently needed on sustainable phenomena whose realities are glaring beyond any doubt.”