ESG Reporting in Kenya

ESG Reporting in Kenya – Quick Guide

July 17, 2025

I am sure you’ve heard the term “ESG” thrown around as Corporate Jargon at a random Thursday morning meeting or a Friday afterwork hangout with colleagues.

But do you really understand what that term means and what it entails, or is it simply a buzzword?

Not to worry – as this article will shed light, in simple terms, on what ESG Reporting in Kenya is all about and how companies can take practical proactive steps towards its effective adoption.

So let’s get started!!

Key Takeways

ESG Reporting in Kenya refers to the structured disclosure of Environmental, Social, and Governance information by companies to promote transparency and sustainability.
It is driven by both global standards (e.g., IFRS S1 & S2) and local regulators such as the CMA, CBK, and NSE.
ESG goes beyond CSR by offering measurable performance metrics critical to investors, regulators, and the public.
Kenya is steadily aligning ESG disclosures with international frameworks, signaling a shift from voluntary to mandatory practices – especially for listed firms and financial institutions.
Opportunities in ESG include access to green finance, enhanced investor trust, and integration into public procurement and SME supply chains.

What is ESG Reporting?

ESG stands for Environmental, Social, and Governance.

ESG Reporting refers to the disclosure of information and data by a company on its performance, progress, and impact in the following three core areas:

Environmental (E): This measures how a company’s operations impact the natural environment, e.g. pollution, energy use, and waste management.

Social (S): This evaluates an organization’s welfare policies and its relationship with employees, suppliers, the community, and other stakeholders—covering labor practices, community engagement, and human rights.

Governance (G): This examines how a company is governed and regulated, including its board structure, internal controls, and anti-corruption measures.

What are the Pillars of ESG Reporting?

1. Environmental Stewardship

This evaluates how a company carries out its operations in an environmentally conscious manner. Key indicators include:

Reduction of carbon emissions
Adoption of renewable energy sources
Sustainable waste management
Environmentally conscious supply chains

2. Social Responsibility

This pillar measures a company’s impact on people and society, including:

DEI (Diversity, Equality, and Inclusion) initiatives
Employee health and safety
Labor practices
Community engagement

3. Governance

This focuses on governance-related disclosures like:

Corporate governance and ethics
Internal controls
Regulatory compliance
Anti-bribery and anti-corruption efforts

ESG Reporting vs Corporate Social Responsibility (CSR)

While often confused, these two are different:

CSR: involves broad, often voluntary initiatives like community engagement and philanthropy.

ESG Reporting: is structured, data-driven, and designed for performance tracking and investor confidence.

Importance of ESG Reporting in Kenya

i) Increased engagement with customers and other stakeholders:

ESG Reporting in Kenya allows companies to put environmental and social issues at the forefront, making their operations more customer-centric and stakeholder-aware.

ii) Investor demand:

Investors increasingly want to allocate capital to sustainable, responsible businesses. ESG Reporting in Kenya helps a company showcase its sustainability credentials credibly.

iii) Risk mitigation:

ESG Reporting in Kenya enables companies to identify and manage long-term risks such as climate change, labour disputes, and governance gaps.

iv) Regulatory compliance:

ESG Reporting in Kenya allows companies to comply with growing legal requirements for ESG disclosures at both global and regional levels.

v) Capital access:

ESG-compliant firms in Kenya may access cheaper capital or qualify for ESG-focused investment funds.

vi) Trust with governing authorities:

ESG Reporting in Kenya helps develop trust with regulatory bodies and government agencies, enabling smoother entry into new markets.

vii) Strategic communication:

ESG Reporting in Kenya empowers organizations to communicate their current sustainability status and outline future ESG initiatives effectively.

ESG Reporting Requirements and Standards in Kenya

Companies – whether listed, NGOs, or multinationals – must understand the complex landscape of ESG Reporting in Kenya to align with regulatory expectations and build credibility and trust among investors, regulators, and the public.

The ESG disclosure landscape consists of two broad categories:

Mandatory frameworks – Set by regulatory authorities globally
Voluntary frameworks – Developed by global institutions or initiatives

Mandatory ESG Reporting Frameworks

These are legally binding requirements issued by regulatory or governmental authorities.

Companies that fall under this category must comply with the reporting requirements; failure to do so may lead to legal penalties, sanctions, or reputational damage.

Some key examples of mandatory ESG frameworks include:

CSRD (Corporate Sustainability Reporting Directive)

Applicable in the European Union.
Requires ESG disclosures in line with European Sustainability Reporting Standards (ESRS) for large and listed companies. Applicable from 2024–2025.

SEC Climate Disclosure Rule (USA)

Applicable in the United States and currently awaiting finalization.
Mandates disclosure of climate-related risks, GHG emissions, and financial impacts.

CMA ESG Disclosure Guidelines (Kenya)

Applicable to NSE-listed companies.
Requires ESG Reporting in Kenya in line with GRI, TCFD, and SDGs.

CBK Sustainable Finance Guidelines (Kenya)

Requires banks in Kenya to identify, monitor, and report climate and environmental risks in their portfolios.

Voluntary ESG Reporting Frameworks

This set of ESG reporting frameworks is non-binding but highly influential. Organizations adopt them to show leadership, improve transparency, and meet investor or donor expectations.

Many voluntary frameworks have shaped global best practices and serve as the foundation for emerging mandatory regimes.

Some key examples include:

GRI (Global Reporting Initiative) – Covers all ESG pillars. It is the most widely adopted global framework, focusing on stakeholder impact and sustainable development.
TCFD (Task Force on Climate-related Financial Disclosures) – Focuses on climate risk. Offers structured guidance on disclosing climate risks and scenario analysis. Now the foundation for many mandatory disclosures.
SASB (Sustainability Accounting Standards Board) – Offers sector-specific ESG Reporting metrics, primarily for investors.
CDP (Carbon Disclosure Project) – Focuses on environmental data. A global platform for disclosing carbon emissions, water use, and supply chain risks.
UN SDGs (United Nations Sustainable Development Goals) – Though not a reporting framework, aligning ESG Reporting in Kenya with the 17 UN SDGs enhances strategic credibility.

Emerging Global Standards: IFRS S1 & IFRS S2

In order to help companies better comply with ESG Reporting, the International Sustainability Standards Board (ISSB) introduced two IFRS Sustainability Standards which are rapidly becoming the global baseline for ESG reporting:

IFRS S1 – Focuses on disclosure of all sustainability-related risks and opportunities relevant to investors and financial performance.

IFRS S2 – Provides detailed guidance for climate-related disclosures, including Scope 1, 2, and 3 emissions.

Both standards integrate TCFD recommendations and aim to unify ESG reporting under a financial materiality lens, making them particularly useful for public companies, financial institutions, and investors.

ESG Reporting in Kenya

Kenya is slowly but surely emerging as a regional ESG leader due to its progressive regulators, climate vulnerability and active civil society.

ESG Adoption is increasingly becoming formalized, especially in listed companies, banks and NGOs.

Key ESG Milestones in Kenya

Year	Development
2015 – 2019	Kenya Bankers Association launches Sustainable Finance Initiative (SFI)
2020	Public focus on climate, health & social responsibility accelerates post-COVID
2021	CMA issues ESG Disclosure Guidelines for all listed firms.
2022	NSE launches ESG Manual & Tracker, requiring companies to report voluntarily.
2023	ESG reporting becomes mandatory for listed companies in annual reports.
2024 – 2025	Kenya explores alignment with IFRS S1/S2; CBK pilots climate risk stress testing

Kenyan ESG Requirements & Guidance

Kenya has made significant strides in institutionalizing ESG practices.Some of the key measures include:

i) Capital Markets Authority (CMA) – ESG Disclosure Guidelines (2021)

The CMA mandates ESG disclosures for:

NSE-listed companies
Licensed market intermediaries
Collective investment schemes (CIS)

Highlights:

ESG reporting is required in annual reports.
Aligns with GRI, TCFD, and UN SDGs.
Lays the groundwork for IFRS S1 & S2 adoption.

ii) Nairobi Securities Exchange (NSE) – ESG Manual & Tracker

The NSE supports ESG adoption by:

Publishing a 2021 ESG Disclosure Manual
Running an ESG Tracker for listed companies
Promoting voluntary reporting aligned to GRI/SASB
Joining the UN Sustainable Stock Exchanges Initiative

iii) Central Bank of Kenya (CBK) – Sustainable Finance Guidelines

CBK guides banks to integrate climate and ESG risks into lending:

Key Provisions:

Identify and disclose environmental/social risks
Use climate scenario analysis and stress testing
Aligns with TCFD and anticipates IFRS S2 compliance

iv) Kenya Bankers Association (KBA) – Sustainable Finance Initiative

KBA’s SFI equips banks with:

Green lending tools and frameworks
ESG training programs
Climate risk screening methods

v) NGOs & Donor-Funded Projects

ESG for NGOs is donor-driven and typically includes:

Human rights & safeguarding policies
ESIAs and environmental due diligence
Anti-corruption & financial transparency
Alignment with UN SDGs, OECD, and green procurement protocols

The Future of ESG in Kenya

As global and domestic forces converge, ESG is set to become a business imperative in Kenya, not just a reporting exercise. Key trends shaping the ESG future include:

1. Alignment with IFRS S1 and S2

Kenya is expected to progressively adopt the IFRS Sustainability Standards developed by the ISSB, making ESG reporting more rigorous, standardized, and investor-friendly.

CMA and CBK are already pushing institutions in this direction.

2. Rise of Green and Sustainable Finance

Kenya is seeing a steady growth in:

Green bonds (e.g., Acorn Green Bond listed on NSE)
Climate-smart agriculture funding
Impact investing platforms

These require measurable ESG indicators to assess environmental and social returns.

3. Integration into Public Sector & Procurement

ESG considerations will be embedded into public-private partnerships (PPPs) and government procurement contracts.

Government and parastatals will be expected to report ESG performance in their development plans and budgets.

4. SME Inclusion and ESG Rating Systems

Kenyan SMEs will increasingly be required to disclose ESG data as part of supply chains for MNCs and listed firms.

Local ESG rating agencies and certification systems are likely to emerge to provide ESG scores for Kenyan entities.

5. Capacity Building & ESG Education

More ESG-focused training programs, CPDs, and academic curricula will be introduced.

Professional bodies (e.g., ICPAK, ICPSK) and universities are expected to include ESG in core certification pathways.

ESG Gaps/ Challenges in Kenya

1. Underdeveloped Governance Structures

Kenya is still in the early stages of ESG adoption. Many companies, especially SMEs and NGOs, lack well-defined governance frameworks to implement, monitor, and report ESG activities.

2. Lack of Standardized Reporting Frameworks

There is no uniform ESG reporting framework across all sectors. While some regulators (e.g., CMA, CBK) have issued guidance, there is a lack of industry-wide alignment. This creates inconsistency in ESG disclosures and complicates comparison across companies.

3. Weak Compliance and Enforcement Mechanisms

Even when ESG guidelines exist, enforcement is minimal. There are limited regulatory penalties or incentives to drive ESG compliance, which affects reporting quality and credibility.

4. Low Awareness and Capacity Gaps

Many businesses and stakeholders are unfamiliar with ESG concepts, reporting standards like GRI, TCFD, or IFRS S1 & S2, and how ESG can impact financial performance or access to capital.

5. Difficulty in Strategy Integration

Integrating ESG into core business strategy and decision-making is a major hurdle. ESG is often treated as a side activity or CSR function, rather than a strategic priority influencing operations, finance, or risk management.

Opportunities for ESG in Kenya

1. Regulatory Momentum & Global Alignment

The Capital Markets Authority (CMA), Central Bank of Kenya (CBK), and Nairobi Securities Exchange (NSE) are gradually aligning local ESG reporting expectations with global frameworks like IFRS S1 and S2.
This lays the groundwork for stronger ESG regulation and assurance practices.

2. Investor and Donor Demand

International investors and development partners increasingly require ESG disclosures as part of funding decisions.
This is pushing Kenyan companies, especially NGOs and multinationals, to adopt sustainable practices and improve transparency.

3. Green Finance & Climate Investment

There is growing interest in green bonds, climate finance, and sustainable banking, especially after the CBK issued climate risk guidelines.
This trend offers new financing channels for companies with strong ESG records.

4. Tech-Driven ESG Solutions

Kenya’s strong tech ecosystem provides opportunities to develop digital ESG trackers, sustainability dashboards, and automated reporting tools, particularly for SMEs.

5. Capacity Building & Training

Institutions like the Kenya Bankers Association (KBA) and Strathmore Business School are increasingly offering ESG-related training, creating a pipeline of ESG-literate professionals to fill the current skills gap.

Frequently Asked Questions (FAQs) on ESG Reporting

1. What does ESG stand for?

ESG stands for Environmental, Social, and Governance. These three pillars measure a company or organization’s sustainability and ethical impact:

Environmental – Climate change, carbon emissions, resource use, waste management
Social – Human rights, labor practices, diversity, health & safety
Governance – Board independence, ethics, transparency, anti-corruption

2. Is ESG reporting mandatory in Kenya?

ESG reporting is not yet universally mandatory in Kenya.
However, the Capital Markets Authority (CMA) requires listed companies, licensed capital market intermediaries, and collective investment schemes (CIS) to include ESG disclosures in their annual reports.
Other sectors like banking and donor-funded NGOs are guided by industry-specific standards and donor requirements.

3. Is ESG reporting audited?

Currently, ESG reports are not subject to mandatory third-party audits in Kenya.
However, some companies voluntarily engage independent auditors to review ESG data – especially where ESG performance is tied to investor confidence, regulatory expectations, or international standards (e.g., GRI, SASB).
As global standards like IFRS S1 and S2 are adopted, assurance of ESG information may become more common.

4. How often should ESG reports be prepared?

ESG reports are typically prepared and disclosed annually, often as part of a company’s annual report or sustainability report.
Companies may also issue interim updates or publish performance data quarterly, depending on regulatory requirements or stakeholder expectations.

Conclusion

ESG reporting is still a nascent concept in Kenya, with many companies and institutions hesitant to fully adopt it.

However, ESG integration is no longer optional – it’s a strategic imperative. Beyond compliance, ESG reporting enhances transparency, attracts investor confidence, and drives long-term financial performance through ethical, sustainable practices.

As Kenya aligns with global standards like IFRS S1 and S2, organizations that embrace ESG early will be better positioned for future growth.

Disclaimer

The information provided in this article is for informational and educational purposes only and does not constitute legal, financial, or investment advice