SEC Adopts Guidelines on Sustainable Finance for Market Operators
By Ndubuisi Francis
The Securities and Exchange Commission has adopted the Nigerian Sustainable Finance Principles (NSFP) as developed by the Financial Services Regulation Coordinating Committee (FSRCC) for the capital market.
SEC said the objectives of the guidelines on NSFP are to stimulate a resilient, competitive and sustainable capital market that promotes economic development and improves the quality of life for all as well as improve corporate governance practices to ensure that players in the market operate in a transparent and sustainable manner.
In a statement released weekend, the Commission also noted that the guidelines are designed to 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 aimed at reducing global warming and other environmental footprints resulting from its activities and those of stakeholders.
The Commission said the guidelines and approach are principles- based and therefore do not prescribe specific implementation requirements but however noted that these principles should be applied by each regulated entity in a manner that fits individual mandates, core values, and enterprise risk management framework.
The SEC noted that reporting enhances companies’ accountability for the effects of their social impacts which in turn fosters social responsibility in organisations and therefore enhances trust while facilitating shared values on which to build a more cohesive society.
The Commission added: “Consequently, regulated entities must report regularly on the extent to which they apply these principles. Consequently, the adoption of financial sustainability principles and its reporting are vital steps towards achieving a sustainable global economy.
“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.”
According to the statement, the primary objective is to achieve a balance in the pursuit of economic prosperity while ensuring environmental protection and social development.
To this end, the principles, it stressed, help create an economic, environmental and social organisation 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.
For instance, SEC stated that in the financial services industry, there is an increasing realisation 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.
It pointed out that in implementing these principles, regulated entities are expected to establish the standards for their organisation and be committed to it, stressing that “they are to set the pace for the integration of the principles into their organizational culture, such that the board and management are committed to sustainable finance and ensuring successful implementation.
They are to ensure proper reporting while regulated entities should ensure that appropriate reports are prepared detailing their progress and performance regarding their commitment to ESG guidelines.
Regulated entities include capital market operators (CMOs), trade groups, self-regulated organisations (SROs) and capital trade points.
The SEC stated that the guidelines on sustainable financial principles set out broad principles and recommendations for better practice in sustainable finance.