Capital market operators have adopted the Nigerian Sustainable Finance Principles (NSFP) developed by the Financial Services Regulation Coordinating Committee (FSRCC) for the capital market.
The Securities and Exchange Commission (SEC) said in Abuja on Sunday that the guidelines would help stimulate competitive and sustainable capital market, to promote economic development and improve the quality of life for all.
Also, the Commission said the guidelines would help improve corporate governance practices to ensure participants in the capital market operate in a transparent and sustainable manner; nurture an environment that facilitates job creation and diversity, women empowerment, human rights protection, access to affordable capital market products by the economically less privileged, and contribute to efforts to reduce global warming and other environmental activities in the market.
The Commission said the guidelines and approach were principles-based and do not prescribe specific implementation requirements for operators.
These principles, the Commission said, should be applied by each regulated entity in a manner that fits individual mandates, core values, and enterprise risk management framework.
Regulated entities include Capital Market Operators (CMOs), Trade Groups, Self-Regulated Organizations (SROs) and Capital Trade Points.
The adoption of the guidelines in reporting would enhance companies’ accountability for the effects of their social impacts, foster social responsibility in organizations, enhance trust and facilitate shared values on which to build a more cohesive society.
SEC said regulated entities must report regularly on the extent to which they apply these principles in their operations.
“The adoption of financial sustainability principles and its reporting by capital operators are vital steps towards achieving a sustainable global economy,” SEC said.
“The Nigerian Capital Market plays a major role in the industrialization and economic development of Nigeria. However, the pursuance of these key objectives involves activities that give rise to a range of challenges, including air and water pollution, climate change, water and natural resource scarcity, environmental degradation, growing population density and poverty. “These externalities and other social impacts affect not only businesses, but also the communities where they operate.
“Sustainable finance principles are guidelines developed to help address the impact of these externalities, ensure long term economic growth, while safeguarding the environment and society.
“The primary objective is to achieve a balance in the pursuit of economic prosperity while ensuring environmental protection and social development,” the capital market regulator said
The principles, SEC said, would help create an economic, environmental and social organization that ensures and improves economic efficiency, prosperity, and sustained economic competitiveness, while contributing to protecting and restoring ecological systems, enhancing cultural diversity and social well-being.”
In the financial services industry, SEC noted that there was an increasing realization that sustainable practices have a potential to save costs, grow revenues, reduce reputational and legal risks as well as drive the development of human capital and improve access to finance.
In implementing these principles, SEC said, regulated entities were expected to establish the standards for their organization and be committed to it.
The entities are to set the pace for the integration of the principles into their organizational culture, such that the Board and management were committed to sustainable finance and ensuring successful implementation.
The entities’ commitment to the principles should be demonstrated through policies and decisions and also ensure their supervised organizations do the same.
They are also to establish sustainable operations approach by having a set of procedures that detail how environmental, social and governance (ESG) and related issues were managed and aligned with existing internal decision-making processes.
The regulated entities are to ensure proper reporting by ensuringj that appropriate reports were prepared detailing their progress and performance regarding their commitment to ESG guidelines.
The guidelines on sustainable financial principles, SEC said, set out broad principles and recommendations for better practice in sustainable finance.
“Since investments in assets, especially long term assets, _directly impact a nation’s development, it is crucial to get the allocation of financial capital right. The capital market operators’ role as intermediaries means they are critical channels through which pricing, regulation and their interaction with society, can direct financial capital to more or less sustainable economic activity.
“These principles, which should be adopted by regulated entities, are essentially a preferred benchmark on which their ESG practices must target. The opportunities this path is opening for both growth and value, make these principles relevant to all mainstream financial institutions.
“These principles will raise awareness and trigger the implementation of sustainable finance ideals among regulated entities and help facilitate the financing of the transition path to a sustainable economy” SEC added.
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