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Tuesday, June 11, 2024

Zenith leads as 5 banks rank top on ESG rating results

 Zenith leads as 5 banks rank top on ESG rating results



Zenith leads as 5 banks rank top on ESG
ZENITH Bank Plc has emerged top out of 29 banks that were assessed based on their Environmental, Social and Governance (ESG) practices and reporting.

A new survey by the Independent Project Monitoring Company (IPC) Limited ranked Zenith Bank first at 65.22 percent, followed by Access Bank at 60.33 percent.

Placed at the third position is Stanbic IBTC Bank at 60.16 percent, Fidelity Bank came fourth at 57.73 percent, followed by the United Bank for Africa (UBA) at 57.19 percent.
 
While Sterling Bank ranked sixth, First City Monument Bank (FCMB) followed at seventh position with 55.10 percent and 54.97 percent, respectively.

The ratings, according to IPC, were benchmarked against the leading global ESG rating companies such as S & P Global and MSCI Sustainability Ratings.

These weightings were determined following a comprehensive analysis of both global rating standards and the specific nuances of the Nigerian business landscape, resulting in allocations of 13 percent for environmental factors, 43 percent for social factors and 44 percent for governance factors.

Within the banking sector, it noted that nearly half of all the banks assessed, totalling 48 percent, have taken the initiative to produce sustainability reports.

The findings also highlight a prevailing trend of non-disclosure regarding sustainability initiatives among insurance companies as it showed that 52 percent of banks assessed do not have sustainability reports, signalling a notable share of the banking sector that remains uninvolved in such disclosures.

According to the report, 21 percent of rated insurance companies have sustainability reports, suggesting a relatively low level of engagement with sustainability reporting practices within the insurance sector.

This indicates a higher level of engagement with sustainability reporting practices compared to the insurance industry.

On gender diversity, only six percent of the rated banks and insurance achieved 50 percent female representation in their board leadership, highlighting a significant gap in gender diversity within corporate governance structures.

“This lack of gender diversity raises concerns about inclusivity and equitable representation at the highest levels of decision-making.

“Only 11 percent of the participating banks and insurance companies prioritise climate risk assessment. This underscores a potential gap in recognising and addressing climate-related risks,” the report indicated.

“Given the increasing importance of climate change considerations in business strategy and risk management, this finding suggests that many companies may not be adequately prepared to navigate climate-related challenges,” the report read in part.

The findings also indicate that only 21 percent of the rated banks and insurance companies have their Environmental Management Systems (EMS) audited.

This suggests that many companies may not undergo independent assessments of their environmental management practices. EMS auditing can help identify areas for improvement and demonstrate a commitment to environmental stewardship.

In his welcome address at the launch of the ESG report in Lagos, Managing Director IPMC, Mr Robert Ode Odiachi, said the Nigerian banking and insurance sector have played key roles in the economy stability of the country.

He said in the midst of growing challenges facing the two sectors, there is growing need for banks to integrate Environmental, Social and Governance (ESG) practices into their operations especially in the area of risk management and reporting.

“This proactive approach helps them stay adaptive to changing regulations, amidst the rising expectations of consumers,” he stated.

Also speaking, Rukaiya el-Rufai, Special Adviser to the President on NEC and Climate Change at the ESG rating report launch, said companies that prioritise ESG are not only contributing to a more sustainable and an equitable world but are also positioning themselves for value creation that not only ensures greater financial performance but embeds value levers that will sustain the performance.

The theme of the event is, ‘Driving Impact: Harnessing ESG for Sustainable Finance.’

According to el-Rufai, corporates must ensure that they attain the fine balance of creating sustainable value for their enterprises as well as for society in what is understood as share value creation.

This means that corporates must look beyond themselves to seek to understand and incorporate what value means to their stakeholders.

“Corporates can leverage frameworks, standards, ratings and guidelines to establish clear expectations and avoid blind spots in their operations.

“Companies that proactively address these issues through sustainable practices, such as reducing carbon footprints, investing in renewable energy and promoting circular economies, are better positioned to thrive in a resource-constrained world,” she stated.

She said social considerations encompass a broad spectrum of issues, including labour practices, community engagement, diversity and inclusion, and human rights, adding that businesses that foster inclusive and equitable workplaces, support local communities and uphold human rights not only enhance their reputations but also attract and retain top talent, foster innovation, earn the social license to operate and build trust with stakeholders.

Strong governance frameworks, according to her, are the backbone of responsible business conduct. This involves ensuring transparency, accountability and ethical behaviour at all levels of the organisation.

Companies with robust governance structures are better equipped to navigate regulatory complexities, avoid scandals and maintain investor confidence, she emphasised.

“Research increasingly shows that integrating ESG factors into investment and business decisions leads to superior financial outcomes.

“Sustainable finance is not about sacrificing returns for ethical considerations; it is about recognising that long-term profitability and sustainability are intrinsically linked. Investors are increasingly demanding that companies demonstrate their commitment to ESG principles and those that do so are reaping the rewards.

“As we move forward, I urge all of you – business leaders, investors, policymakers and stakeholders – to embrace the principles of ESG wholeheartedly. Let us commit to making decisions that not only drive financial performance but also contribute to the well-being of our planet and societies.

“By doing so, we can create a future where businesses thrive in harmony with the environment and communities they serve,” el-Rufai stressed.


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