By Sandra Villars, Partner at Oliver Wyman
To achieve its Sustainable Development Goals by 2030 and unlock the potential of its youthful population, Africa needs $7-trillion, with $6-trillion of this dependent on private sector investment, including banks and financial institutions.
Remember, sub-Saharan Africa is currently home to more than 1 billion people and it’s estimated that by 2050, half of the continent’s ever growing population will be under the age of 25. For those young people to become an active part of the economy and to share in global prosperity, Africa needs to unlock capital on a large scale.
Today’s investors are increasingly seeking commitments to non-financial disclosures and sustainable reporting from banks, as well as greater accountability and transparency when it comes to the disclosure of the social and development impacts of the projects that are financed by the banks they choose to work with.
While advocacy groups have developed disclosure guidelines, they are mostly voluntary. However, companies that do not comply with these reporting protocols and standards may face challenges in loan and investment approval processes, including from funding sources such as pension funds and development finance institutions.
Although African banks understand the importance of improving their reporting and social, environmental, and governance track records, many are not taking the necessary measures to address this need. A recent poll by Oliver Wyman of board members, banking executives, financial services investors, and heads of sustainability found that 70% believe that the quality of a company's non-financial disclosure reflects management's commitment to ESG issues, while two-thirds agree that the reputational benefits of voluntary reporting generally outweigh any reputational risks.