“The starting point is how we make Mauritius become an issuance platform for ESG products”

The CEO of the Stock Exchange of Mauritius raised some fundamental questions on the present situation, where companies are called to navigate towards ESG compliance while ESG Reporting Guidelines are yet to be established in Mauritius. For Sunil Benimadhu, the new partnership between Risk Insights and the Stock Exchange of Mauritius is adding a new chapter to SEM’s engagement on the sustainability front.

“Once we are seen to be a place for the issuance of green sustainable bonds, we can go and start selling our global business sector as a place companies that are issuing bonds in Africa could do it through to leverage on the number of advantages that Mauritius offers as a jurisdiction,” he said. 

The partnership between Risk Insights and the Stock Exchange of Mauritius was launched last Friday at Hennessy Park, Ebène.

“We all know that currently, there are no established ESG reporting guidelines in Mauritius, although I know that a number of institutions, including the National Committee on Governance, are working towards coming up in the near future with reporting guidelines. Are we putting the cart before the horse by getting into this partnership with Risk Insights? The answer is no, because this partnership will put our listed companies in the driver’s seat in terms of taking a leadership position in terms of driving ESG reporting in the country,” the CEO of the Stock Exchange of Mauritius stated at the launch of the partnership between Risk Insights and the Stock Exchange of Mauritius. 

Risk Insights was established in 2009 and is a data science company specializing in ESG. It is recognized for creating pioneering AI powered ESG rating tools, which also ensure a balanced application of global ESG standards to local realities. The partnership between Risk Insights and the SEM aims at providing the listed and unlisted companies in Mauritius with a comprehensive suite of ESG rating tools, disclosure insights, analytics and ESG intelligence impact reports. 

In a survey of SEM listed companies, it was found that 20 listed companies, which are also leaders in their different sectors, are already involved in ESG reporting. The SEM gathered that many others are currently considering engaging in some form of ESG reporting, and it is strongly believed that the partnership with Risk Insight will provide all these companies with a well-established framework to assess their current ESG reporting. The objective in the short to medium term is to empower Mauritian companies to improve the quality, but also the substance of their ESG reporting in the country.

If only 0.1% of the global ESG assets could flow through our IFC, it would amount to around $5 billion coming through Mauritius at some point in time.

What does this Risk Insight rating entail for some listed companies and non-listed companies? For those that are already reporting on ESG and some that have also integrated reporting, it is considered by the CEO as a good way to benchmark the scope, the context and the depth of their current ESG reporting against Risk Insight’s ESG GPS rating tool. It is also a way for them to leverage on this rating outcome and the feedback provided by the rating to enhance their ESG reporting standards, and in so doing, they will be embracing a leadership position in ESG reporting, not only in the country, but also in the region. 

For companies that are not yet reporting on ESG now but that are seriously considering to do that, Sunil Benimadhu sees the opportunity as an excellent way of gaining an in-depth understanding of what structured ESG reporting is all about. This would allow these companies to embark on a quick learning curve on ESG reporting and put themselves in a position to move at a quicker pace from a non-ESG reporting stand to a well-structured ESG reporting. 

This brings us to the question that the CEO of the SEM asked in his introductory remarks. Today, in the absence of very well established guidelines, it’s a relevant question to ask: are we putting the cart before the horses? Is it not premature to assess the standards of ESG reporting by our listed companies when currently, there is no firm regulatory guidance on ESG issues in the country, like we have for corporate governance? Another question raised by Mr Sunil Benimadhu is the following: Without a local ESG framework, what are the reference points that our listed companies will use for reporting their environmental and social practices? How are we going to ensure consistency and comparability in the ESG reporting among companies without a well-established framework? 

“Until the formal adoption of ESG reporting guidelines emerges, we believe that Risk Insights rating constitutes a strong catalyst for change, encouraging those same listed companies that are already reporting on ESG to be ahead of the curve by adopting ESG practices and reporting that are based on best international practice. It includes IFRS, S1, S2 and CRSD, and it is based on international practice frameworks like GRI, CPD and others. This provides an excellent opportunity for our listed companies, but also unlisted, to future approve their investments and measure that against the expectations of local and international investors, that are very well focused on what ESG should be in terms of reporting. It provides the investors with a more holistic understanding of the companies they are investing in. It’s not only about profits, it’s also about what companies are doing in terms of stakeholders’ interests, and will provide some form of competitive advantage and enhance shareholders’ value. There are a number of studies that have been effected that clearly demonstrate that there is a strong positive correlation between companies that are involved in proper ESG reporting and their performance and value creation and market capitalization over time. A study between January 2013 and December 2021 by a company called Krull, which surveyed hundreds of companies, especially in the developed world, came up with three different indices to measure the performances of these companies over the period of time and grouped these companies in three different categories. Those that they considered as ESG leaders were highly rated in terms of their ESG reporting. It’s very clear that over time, the ESG leaders have around 35 to 40 percent premium in terms of their valuation, compared to the laggards,” the CEO explained.  

He also shared some personal thoughts from a macro perspective on how championing ESG in Mauritius will drive value and probably create the next development lap of the Mauritius IFC as we move forward. Well-managed and performing ESG compliant companies and jurisdictions will become magnets of global investment flows, he says. The change is already happening in Europe. Investment flows in the future will go towards those jurisdictions that are championing ESG, which is a key driver of financial markets. Gaining from this ESG focus shift will happen if we are visible in the beginning on the ESG financial products issuance front. Some of the champions on ESG, for example Luxembourg, they have done a lot of inroads on that front and they have been busy trying to promote issuance of green sustainable products and listing these products. This has created some form of traction for these jurisdictions, and they are now attracting global order flows to their markets. 

“The starting point is to strategize on how we make Mauritius become an issuance platform for ESG sustainable products, starting first from a domestic standpoint. This is where it will be interesting to engage with the Bank of Mauritius, but also with the policy makers in Mauritius, because I believe that the government can definitely take a leadership position by issuing and listing sovereign green sustainable bonds targeted to green sustainable projects. I will also go one step further by saying that the timing is also right to issue and list impact bonds that have a social nexus. We all know for example that government today is already funding a number of social programs, and I believe that these could be funded via the issuance of social impact bonds, rather than being funded from the consolidated fund, and at no additional cost. The same thing applies in funding environmental projects. It’s a question of identifying these environmental projects and then issuing sustainable or green bonds and saying that this money that is being raised is targeted,” the CEO of the Stock Exchange of Mauritius advised. 

He added that there is the reporting aspect, but there is a lot of funding available within SABC today to help governments come up with the necessary structure in terms of reporting and putting together the documentation. Everything is there, it’s a question of just moving into that space, Sunil Benimadhu highlighted. 

The private sector, and the private sector companies which are championing it, are already coming to the front and issuing green sustainable bonds. Once the jurisdiction becomes visible and is seen to be active on the ESG issuance front, the next target is to leverage on our global business sector to position the IFC of Mauritius as an issuance listing platform for Africa-related green sustainable financial products, indicated the CEO. According to available statistics, there have been $2.5 billion and $2 billion of new issuances of ESG bonds in Africa in 2021 and 2022 respectively

Gaining from the ESG focus shift will happen if we are visible, in the beginning, on the ESG financial products issuance front.

“Once we are seen to be a place for the issuance of green sustainable bonds, we can go and start selling our global business sector as a place companies that are issuing bonds in Africa could do it through to leverage on the number of advantages that Mauritius offers as a jurisdiction. There are predictions that within the next five years, one-third of global assets under management are expected to flow to ESG compliant companies and ventures. If you look at pension funds, the biggest pension funds globally are all making a pledge to invest in well performing companies, in profitable companies, of course, but also companies that are at the forefront of the ESG battle. Investors will stop investing in companies which are not ESG compliant, even if they are highly profitable,” the CEO of the SEM forcefully explained to the audience. 

He added that if only 0.1% of the global ESG assets could flow through our IFC, it would amount to around $5 billion coming through Mauritius at some point in time. 

The CEO ended his presentation with a quote from Shakespeare’s Julius Caesar, which reads as follows: “There is a tide in the affairs of man, which taken at the floods, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and miseries.”

Sunil Benimadhu believes that the ESG tide is rising at the global level, and that the timing is perfect for Mauritius to take a leadership role on that front. “We need to be bold and forward-looking, and start strategizing on how to take this ESG tide at the floods. I believe that the same risk inside this partnership is one which, in its own modest way, can contribute to enhancing our attractiveness as an IFC focused on ESG and setting the stage for our next development of our IFC,” he concluded.