Why Global ESG Frameworks Fall Short
The major ESG frameworks — GRI, SASB, TCFD, the UN PRI — were developed primarily in the context of developed market institutional investors and large-cap listed companies with robust disclosure practices. Their materiality assessments, data requirements, and reporting templates reflect the investment universe of European and North American institutional investors: liquid equity markets, deep corporate bond markets, and a decades-long tradition of voluntary corporate sustainability reporting.
African institutional investors applying these frameworks without adaptation encounter immediate problems. The companies in their investment universe frequently do not produce TCFD-aligned climate disclosures, GRI sustainability reports, or detailed supply chain transparency statements. ESG data providers — MSCI, Sustainalytics, Bloomberg — have limited and inconsistent coverage of African-listed companies. Applying global screening criteria to a portfolio composed primarily of domestic equities, government bonds, and real estate may eliminate most investable assets without meaningfully reducing ESG risk.
Conducting a Local Materiality Assessment
The starting point for an Africa-relevant ESG framework is a materiality assessment that reflects the specific economic, social, and governance context of the markets in which the institution invests. For an East African pension fund, material ESG factors might include: exposure to companies dependent on water-stressed agricultural supply chains, governance quality in state-owned enterprises (which often represent a significant proportion of listed markets), social licence risk in extractive industries, and regulatory and political risk in countries with weaker institutional frameworks.
Materiality assessment should involve the investment team, the trustees or board, and where appropriate the investment managers, in a structured process — not a one-time desktop exercise. The output should be a documented, agreed set of ESG factors that are material to the specific institution's portfolio, with clear guidance on how those factors are incorporated into investment decisions.
“ESG frameworks built for European pension funds cannot be applied wholesale to African institutional investors. Materiality, data, and regulatory context are all fundamentally different — and the framework must reflect that.”
— Niloyd Associates ESG & Advisory Practice
Building Workable Data Approaches
ESG data availability in African markets requires a differentiated approach. For large-cap companies listed on the Nairobi Securities Exchange, JSE, or Nigerian Exchange, some third-party ESG data is available — though coverage is uneven and data quality varies significantly by provider. For smaller listed companies, government bonds, and unlisted infrastructure investments, institutional investors must develop in-house assessment methodologies or engage directly with investee companies to gather relevant information.
Proxy indicators — where direct ESG data is unavailable — can provide a workable starting point. Country-level governance indicators (World Bank, Transparency International), sector-specific environmental risk profiles, and company-level engagement data can supplement third-party ESG ratings to build a more complete picture. The key is to be transparent about data limitations and to document the assumptions and methodologies used — particularly for regulatory and beneficiary reporting purposes.
Regulatory Alignment and Reporting
The regulatory landscape for ESG in African financial markets is changing. The CMA Kenya has issued guidance on ESG disclosure expectations for listed companies. The IRA has begun incorporating governance requirements into its supervisory framework. Development finance institutions and international partners increasingly require ESG commitments from co-investors. Institutional investors that have already built ESG frameworks are better placed to respond to these evolving expectations than those starting from scratch.
Reporting on ESG integration should be proportionate, honest, and useful. Claiming compliance with frameworks that have not been fully implemented, or reporting ESG metrics that do not reflect genuine integration into investment decisions, exposes institutions to reputational and regulatory risk. A credible ESG report describes what the institution actually does — the policies, processes, and outcomes — not a theoretical ambition disconnected from investment practice.
Key insights
Materiality is context-dependent
What is material for a European pension fund — carbon disclosure, executive pay ratios, supply chain labour standards — may not be the most material ESG consideration for an African institutional investor. Local materiality assessment is essential.
Data availability is the binding constraint
Global ESG frameworks assume a level of corporate disclosure that does not yet exist across most African capital markets. Institutions must build data approaches that function with the disclosure environment they have, not the one they wish for.
Regulatory alignment is a moving target
Regulatory expectations for ESG integration in African markets are evolving rapidly. Institutions that embed ESG now are better positioned to meet regulatory requirements as they crystallise — rather than scrambling to comply retrospectively.
Conclusion
ESG integration for African institutional investors is not about adopting a global framework and ticking the boxes. It is about building a genuinely fit-for-purpose approach that reflects local market realities, operates within actual data availability, and delivers real improvements in how ESG risks and opportunities are understood and managed. Niloyd Associates works with pension funds, insurance companies, and asset managers to design ESG frameworks, conduct materiality assessments, build data approaches, and produce credible ESG disclosures — grounded in the specific context of African institutional investment.
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