KENYA Law and Practice Contributed by: Sammy Ndolo, Brian Muchiri, Damaris Muia and Nicole Gacheche, Kieti Law LLP
2. Corporate Governance Context 2.1 Hot Topics in Corporate Governance The Kenyan corporate governance landscape is witnessing an increased focus on environmen - tal and social responsibility. This emphasis is particularly evident in the realm of “green” and sustainability reporting. In this regard, the Central Bank of Kenya ( “CBK” ) published the Guidance on Climate-Related Risk Management ( “CBK Guidance” ), which lays out a framework for banks and mortgage refinance companies, requiring them to integrate climate- related risks into their core functioning and ensuring that business decisions and activities account for potential climate impacts. Key Aspects of CBK Guidance Time-bound plans Banks and mortgage refinance companies must develop a concrete plan with specific timelines. This plan, detailing the implementation of the CBK guidance, needs approval from the board and signatures from both the CEO and Chair - man. Quarterly reporting To ensure accountability, banks and mortgage refinance companies must submit quarterly pro - gress reports to the CBK within ten days after the end of each calendar quarter, starting from 30 September 2022. Future impact The emphasis on climate-related risk manage - ment by the CBK strongly suggests that “green” and sustainability reporting will be a major talking point in Kenyan corporate governance for 2023 and the foreseeable future. It is likely to extend to other players in the financial sector and influ -
ence corporate governance practices across a broader spectrum of Kenyan businesses. 2.2 ESG Considerations There are no requirements for private or public companies to report on ESG issues. However, companies listed on the NSE have the following reporting requirements. Companies Act The directors’ report for listed companies must incorporate a business review section. This sec - tion delves into the company’s environmental practices, employee treatment, and social and community involvement. NSE ESG Disclosures Guidance Manual (“ESG Manual”) Issued in late 2021, this manual provides listed companies with a framework for collecting, ana - lysing, and publicly disclosing ESG information. The objective is to achieve alignment with inter - nationally recognised reporting standards. Sustainable Finance Initiative In addition, certain industries, such as the bank - ing sector, have established their own ESG-relat - ed guidelines. For instance, the Kenya Bankers Association’s Sustainable Finance Initiative ( “SFI” ) encourages its member banks to: • implement robust environmental and social risk management systems; and • publish comprehensive sustainability reports biennially (every two years).
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