CBZ accelerates ESG drive

CLOUDINE MATOLA

Financial services group, CBZ Holdings Limited (CBZHL) , has stepped up its adoption of  environmental, social and governance (ESG) factors as part of efforts to  foster  corporate sustainability, value creation and competitiveness, Business Times can report.

It comes as many companies listed on the country’s two stock exchanges -the Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Stock Exchanges (VFEX)-  have been reluctant to react to the ESG rules that were put in place  by the ZSE  in 2019.

This was revealed by board chairman, Luxon Zembe, who said CBZHL has picked up pace in implementing ESG rules.

“The group accelerated its drive to create long term value through embedding Environmental, Social and Governance, (ESG), factors into its strategy and operations,” Zembe said.

He added: “As a result, in addition to the ongoing certification with the European Organisation for Sustainable Development, the Group obtained a nomination for accreditation with the Green Climate Fund. The Group also engaged the International Finance Corporation for advisory services on ESG, Climate Governance and Climate Risk.”

The move by CBZHL is critical as a

a growing number of investors globally are screening potential investments using ESG standard criteria, and as a result, business sustainability has become a big deal.

Apparently, the ZSE gazetted the ESG rules in 2019, but  more than 90% of listed entities have been defying the reporting requirements, which means that non-financial information makes up less than  10% of annual reports  for listed companies.

Recently, the ZSE CEO, Justin Bgoni, asserts that listed businesses should incorporate the corporate sustainability business model into their financial disclosure as a means of achieving long-term success , value creation, and competitiveness.

The ZSE has modified its listing requirements to require listed companies to implement policies addressing environmental, social and governance issues.

Apart from the ZSE listing requirements, local companies are required by other laws to implement sustainability reporting.

These include Statutory Instrument 113 of 2019 (Securities and Exchange (ZSE Listing Requirements) (Section 399-404: Sustainability information and disclosure), Companies and other business Entities Act (24:31) Section 220, and Public Entities Corporate Governance Act which was enacted in 2018.

This means sustainability reporting is here to stay in one way or another.

In fact, ESG has already taken centre stage in many countries across the world, which means that investors are beginning to recognise the value of sustainability reporting and are choosing to take environmental concerns and other values into account when choosing investments, rather than only   on an opportunity’s potential for a profit or risk.

All companies are now required to adhere to the standard, which is designed so that investors can access a fuller picture of the sustainability impact  of companies  they are investing in.

 According to Bgoni, the ZSE has developed core sustainability disclosure criteria for adoption as a minimal starting point, taking into consideration the IFRS Sustainability Standards and the Global Reporting Initiatives (GRI) Standards. Issuers are, however, not limited to these fundamental disclosure requirements and are free to submit other data, such as industry-specific information.

Issuers are still required to conduct materiality evaluations.

The amount of money donated or spent on initiatives or programs targeted at enhancing the neighborhood, lowering poverty, creating small jobs, constructing clinics, and many other goals is disclosed in a number of ways.

A description of the approach taken by the companies to manage their tax affairs, the amount paid by the tax head, contributions made to company-based pension schemes, the National Social Security Authority (NSSA), and expenditures on both domestic and foreign suppliers should also be disclosed.

Additionally, companies must also reveal how much energy, coal, diesel, and gasoline they use overall.

Together with the head count of newly hired staff, they should also report turnover (departures), excluding contract staff. Employees of the company and contractor employees should be disclosed individually. Businesses must also reveal the proportion of current total employees by gender (male and female).

The proportion of female and male directors, the breakdown of directors into non-executive, executive, and independent categories, and the qualifications, experience, skills, and other responsibilities of board members such as other directorships in other businesses must all be disclosed. Additionally, the companies are required to submit a compliance statement outlining any major legal disputes or fines they have paid.

In its financial results for the 12 months to December 31, 2023, total income grew by 340% to ZW$2.4 trillion from ZW$1.2 trillion reported in 2022.

This resulted in profit after tax soaring 330% to ZW$693bn in the period under review from ZW$161bn reported in the prior comparative period.

The value of the total assets increased by 80% to ZW$8.2 trillion as at December 31 2023 from ZW$4.6trillion reported in the previous year.

In addition, total advances increased to ZW$2m for the year ended December 31 2023 from ZW$846 797 recorded prior comparative period.

Total deposits also rose by 71% to ZW$5.5m compared to ZW$3m registered the previous year.

Also basic earnings per share rose to 125 351c in 2023 from 30 797c recorded in 2022.

CBZHL group chairman Luxon Zembe stated that the business is anticipating a strong performance from mining, real estate , food services and wholesale and retail trade sectors, given that El Nino’s negative  effects are also affecting  agriculture and related sectors.

“ In Zimbabwe, however, the Government expects growth to moderate further to 3.5% as the adverse effects of the El Nino effect become more pronounced particularly on the agricultural and related sectors. Relatively strong performance is, however, still expected in the mining, accommodation and food services, and wholesale and retail trade sectors,” he said.

In order to be ready for new opportunities and hazards, he continued, the firm would keep an eye on commodity prices, possible supply chain disruptions and trade flows.

“The downside risks to the growth projections include, among others, prolonged weak commodity prices, especially for base metals and PGMs, potential further disruptions to supply chains and trade flows, and currency weaknesses. The group will continue to monitor these developments for quicker detection of, and response to, emerging risks and opportunities,” he said.