The State of ESG in Africa

Flamingos flying together at the top of the sea

The State of ESG in Africa

The State of ESG in Africa 1272 589 ESG Enterprise ESG Enterprise

In the past, institutional investors’ primary objective, and the investee company’s primary obligation, was to maximize short-term returns for shareholders, without regard for other factors like social and environmental impacts.

Now, there is a massive adoption of Environmental, Social, and Governance ESG criteria by companies seeking to attract investors. Thanks to the rise of the ‘responsible investment’ movement, an increasing number of investor firms are allocating funds based on ESG considerations.

Embracing ESG practices within an organization offers a wealth of benefits: it improves productivity, business performance, and adaptability to evolving technology or new regulations, boosts financial indicators, and enables corporations to promote environmental sustainability.

Hence, the increasing popularity of ESG in the US and EU markets. While the African market is ripe and shows potential for ESG adoption, public data suggests that Africa still has a long way to go in terms of managing resources sustainably, developing management models that recognize the value of all members of the workforce, and developing business models that keep Africans accountable to their principles as well as to their communities.

In this article, we will explore the state of ESG in Africa with a focus on Nigeria, South Africa, and Namibia.

Nigeria ESG

In Nigeria, a growing number of companies are now adopting environmental and social principles and values as part of company governance to drive long-term performance. According to the Centers for Diseases Control (CDC) analysts, Nigeria’s market shows great potential for rapid industrialization, making the shift in approach to ESG considerations increasingly critical.  Nigerian private equity funds are at the forefront of this movement and are increasingly structured and resourced internally to integrate ESG analysis at the heart of their decision-making processes.

Several established firms boast relatively well-established environmental, health, and safety-orientated management policies and processes across the Nigerian oil and gas and power and manufacturing sectors. This is particularly noticeable where they have a significant tie with a multinational that encourages global good ESG practices such as IFC Performance Standards. Even in these sectors, though, the level to which ESG policy and processes lead to effective implementation varies between organizations. With smaller and medium-sized businesses where systems are less formal and resources fewer, implementations are more inconsistent.

While guidelines governing how companies must act from an ESG point of view have been instituted in Nigeria – such as regulations on environmental and social impact assessments, laws on local pay, and the Central Bank of Nigeria’s Sustainable Banking Principles, there is a growing need to strengthen existing sectoral guidelines and promote a more vigorous approach to enforcement.

In 2019, renewables and energy efficiency garnered some traction within the overall energy mix. However, recent examples where industry decided to turn to coal as a fuel (to ensure reliable supply) rather than gas (because of disrupted supply) demonstrate that there is a long way to go before there is an acceptance of environmental impact over commercial gains. Better incentives need to be introduced to drive optimal behavior.

Gender equality in the workplace is another critical ESG issue in Nigeria. According to the McKinsey Global Institute, one in four board members of companies in Africa is leading the world averages. Still, too many women from poorer backgrounds remain excluded from the financial system or overlooked within the corporate value chain. When it comes to gender considerations within the Nigerian workforce, more needs to be done by companies to empower women by providing training and professional development programs that will facilitate fair representation at middle and senior management levels. There is also the need for companies to restructure their supply chain design to ensure women-owned businesses are set up to compete successfully for contracts and create products and services that are affordable and accessible to women on low incomes.

South Africa ESG

Initiatives such as the King Code on corporate governance and the Code for Responsible Investing in South Africa (CRISA) have placed South Africa as one of the most advanced jurisdictions in the world in terms of ESG.

To join the ESG global bandwagon, in 2012, the Johannesburg Securities Exchange became a founding signatory of the Sustainable Stock Exchanges Initiatives (SSEI) at the UN Global Compact’s Corporate Sustainability Forum held in Rio de Janeiro, Brazil. As part of this, one of JSE’s primary goals was to promote sustainable finance in the South African market and committed to the vision of creating a world where capital markets align with public policy goals on sustainable development.

Since that decision, several standards and indicators have been introduced, some of which are international such as the Global Reporting Initiative, which lists 36 modular standards to address energy and water use and labor practices. Beyond these standards, certain changes made to local regulations such as iterations of the King Code on Corporate Governance have played a significant role in improving ESG reporting by investee companies.

As a result, asset managers now have unquestioned access to information that would previously have only been available on request and sometimes denied—ranging from more comprehensive information on remuneration to details on the information that corporates previously did not consider to be important enough to communicate, such as water consumption, carbon emissions, and mining fatalities.

The Climate Bill is another regulation worthy of mention; it was introduced in 2018 to catalyze the long-term transition to a climate-resilient and lower-carbon economy and society.

Furthermore, in 2020, Refinitiv identified three major trends in ESG in South Africa.

Firstly, it was discovered that ESG was not necessarily at the top of the priority list for corporates and investors in the country; however, there were signs of change. From an investor and analyst point of view, there was a definite shift from the social or environmental factors of ESG towards a more holistic view that focused on creating sustainable companies.

Lastly, corporates were abandoning survival mode to embrace active participation and taking proactive steps to measure ESG and measuring how they stack up locally and internationally.

Namibia ESG

A study conducted by the University of Pretoria suggests that private equity is a nascent industry in Namibia, with the main regulatory framework set out in Regulation 29. The purpose of this regulation is to provide a framework for the prudent management of the unlisted investment sector. However, this regulation 29 does not address ESG specifically.

The study also revealed that there is an awareness of ESG integration across the PE sector, and PE organizations consider ESG in their investment practices; however, the procedures for implementing ESG practices are not necessarily formalized. Thus, in most cases, assessing ESG factors are in progress to be formally recognized.

Further, investors demonstrate RI practices from the perspective of ESG investment exclusions. This means that they don’t deploy their funds to portfolio companies in any sin-related industry, such as gambling, liquor, and tobacco. Namibia PE doesn’t also consider investments where there are ethical concerns around the promoter, entrepreneur, or management teams of investee companies.

Barriers to the implementation of ESG initiatives across industries in Namibia include an additional cost for ESG adoption, limited access to ESG data and specialists, the small number of PE firms in Namibia, sacrificing investor returns in favor of ESG integration, and the lack of incentives for ESG.


Despite the failure of African countries to prioritize ESG values, the continent demonstrates great potential: it has some of the fastest-growing companies in the world, every region has something to offer, be it natural resources or human capital, and it is teeming with young people who are eager to develop it into a valuable, diverse, global leader. Relevant stakeholders must therefore harness these possibilities to attract responsible investors and promote socio-economic development.


10X Faster ESG Data Collections & Reporting

10X Faster ESG Data Collections & Reporting

Automatic ESG reporting by 30+ global frameworks including GRI, SASB, TCFD, CSRD, ISSB, EU SFDR, EU TAXONOMY, CDP and more.


By completing this form, you will have opted-in to marketing emails from apexESG Enterprise.

You have Successfully Subscribed!