The effect of ESG Reporting on the reduction of Climate Change: A focus on the “E”

Abstract

In the recent past, financial institutions have sought to incorporate sustainability in their scope of work. Since they are one of the main players in development, financial institutions have taken it upon themselves to ensure the activities they are funding are not encouraging environmental degradation. The International Monetary Fund (IMF) and other global institutions are hell-bent on encouraging “green finance” worldwide. In Kenya, the Nairobi Securities Exchange (NSE) has come up with Environmental Social Governance (ESG) disclosure guidelines. All listed companies are encouraged to include ESG disclosures in their annual reports. Stakeholders are no longer interested in just the financial performance of companies but also the environmental social and governance impact that the company has in the society. Companies are expected to make these disclosures every financial year. Banks and other lending institutions are also encouraged to find out how creditors intend to use the money borrowed and whether the intended activities will have a positive or negative impact on the environment. The question that this research paper seeks to answer is whether the data received in the ESG disclosures would have a direct impact in the reduction of climate change. Being voluntary self -reported disclosures, reliance is made on the goodwill and honesty of the company. The author shall rely on publications and interviews to conduct the research. The research seeks to establish whether sustainable development would be achieved where only guidelines are provided.