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Picture: 123RF
Picture: 123RF

As delegates prepare for the UN Climate Change Conference (COP26) on Sunday, the global community is very much alive to the sustainability clock and that it is ticking loudly.

The number of funds dedicated to sustainability efforts have soared in recent years, with governments, investor groups, civil society and NGOs all doubling down on their efforts to strengthen and improve corporate environmental, social & governance (ESG) regulations and their interpretation.

The run-up to COP26, the fifth since the signing of the Paris Agreement in 2015 has underscored the pressing need for increased impetus via new legislation, policies and regulation as evidenced by the accelerating impact of climate change on the environment, society and the economy.

Many nations and corporates are “walking the walk” with numerous fresh commitments to coincide with the conference. In SA, President Cyril Ramaphosa last month pledged to set lower targets for greenhouse gas emissions as part of his drive to decarbonise the economy after the Presidential Climate Change Coordinating Commission called for more ambitious plans to achieve net zero emissions by 2050.

Covid-19 has expedited the need for a different way of investing. Besides forceful efforts from institutional investors globally on ESG, policymakers and regulators are also more aware than before of the need to strengthen disclosure requirements to drive real change. There is now a far greater expectation that companies will adapt business models that prioritise ESG in what the World Economic Forum has dubbed “stakeholder capitalism”.

Indeed, institutional investors are increasingly scrutinising ESG disclosures by corporates. According to our latest Resilience Barometer released in September, more than three-quarters want more information about ESG strategies and nearly 90% support governments setting targets for non-financial reporting.

The EU is widely acknowledged to be the world leader from a policy perspective, yet Africa must also define its part in the sustainability challenge and champion its own goals. We know the continent has faces immense obstacles in adapting to the threats of climate change. Many countries across the continent are grappling with challenges that, from an ESG perspective, differ from those of their counterparts in developed nations.

As such, the direction of Africa’s sustainability journey should support the transition of its emerging economies. This can only be achieved by the continent making itself heard within the global ecosystem to ensure it is not disadvantaged by broader adoption of principles and frameworks while not deviating from the global standard. Current debate centres on which disclosures should become the dominant benchmark. The creation of a “parallel universe”, with developed and developing markets opting to adopt different frameworks, risks further delaying, perhaps catastrophically, the necessary global climate action.

Africa must work with partners, regulators and multilaterals to influence how its countries embark on their path of decarbonisation, and set net zero targets that ensure As the global supply chain increasingly extends into countries across Africa, the continent cannot afford to be the weakest link. If it is to cement its intercontinental trade potential and create wealth from lucrative exports, African nations must be aligned with the same standards as their trading partners.

For much needed foreign investment, universal benchmarks can enhance the ability to attract capital, potentially at a lower price and with financial incentives that can help developing nations adapt to climate change. International and domestic financial institutions are realigning their investment policies away from fossil fuel investments towards cleaner, renewable energy, increasingly driven by shareholder activism. Sustainability can no loner be seen solely through the lens of  cost or the complexity of compliance with the UN sustainable development goal targets.

Still, a just energy transition must include  alternative growth areas to ensure affected fossil-fuel powered sectors and their stakeholders, including workers, can find new opportunities to thrive. We must harness the potential of our investment into alternative industries to build new areas of expertise within the green economy.

Just as companies embrace ESG and move from an agenda of regulatory compliance to one of leadership through innovation that attracts investors and delivers growth opportunities, so countries must focus on the same. These opportunities need to be environmentally and socially sustainable and extend across all sectors of the economy at every stage of the value chain.

Never has the case for sustainable economic growth in Africa been greater — or more urgent.

• Parker is MD: strategic communications at FTI Consulting.

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