In a bid to 'keep the conversation going,' ENS Namibia's Windhoek office hosted a panel discussion seminar on 12 October 2023, delving into the unfolding Environmental, Governance and Social ("ESG") trends poised to shape Namibia's economic landscape in the near future. The panel, moderated by ENS banking and finance executive, Jessica Blumenthal, who also specialises in ESG, focused on themes surrounding the transition toward a green economy including:
- Adaptive good governance practices to meet sustainability targets;
- The risk of climate-related litigation;
- Sustainable project financing, and
- The impact of ESG principles on project development and the real estate industry.
In this article, we round up some key takeaways from the seminar.
Decarbonisation and the Circular Economy
Stefanie Busch, senior associate at ENS, unpacked the buzzword 'decarbonisation". The emphasis was on the reduction of carbon emissions and the transition to cleaner energy sources to mitigate climate change impact, particularly pressuring businesses to align with a 'green' economy. Notably, she highlighted the intersection of the fossil fuel extractive industry with renewable energy in this reimagined economy, citing global trends in integrating green technologies. Corporate actors in fossil fuels can diminish environmental impact through innovative practices such as fuel stations installing rooftop solar systems and implementing 'smart grids' in office buildings for optimised energy consumption. This reimagined economy also embraces a 'circular economy,' aiming to reduce waste by repairing or recycling items to create a continuous value loop.
Good corporate governance
Another ENS senior associate, Karin Malherbe, stressed the crucial role of ESG considerations in corporate governance noting that although ESG seems recent, its principles are deeply embedded in Namibia's corporate governance code, the "NamCode". Operating on an "apply or explain" basis, the NamCode requires companies to adhere to its principles, failing which, to provide clear explanations for any non-compliance. While not explicitly mentioning ESG, the NamCode incorporates guidelines supporting ESG concepts, emphasising boards' responsibility for sustainable and responsible corporate citizenship.
Karin also discussed the NSX Directives, mandating the establishment of Social, Ethics, and Sustainability ("SES") committees for listed entities to integrate ESG into business strategies. Highlighting legal obligations under the Companies Act, including fiduciary duties, she emphasised the legal and personal consequences directors face for not meeting ESG standards. Karin underscored the proactive adoption of ESG principles by directors to safeguard companies and themselves from legal exposure.
ENS executive, Vanessa Boesak then delved into the escalating risks of climate-related litigation, starting with the global trend of parent company liability as illustrated by the Royal Dutch Shell case. The case set a precedent for parent companies' duty of care under the European Convention on Human Rights, extending beyond their operations to include emissions from suppliers and customers. Vanessa also underscored the substantial investments and engagements required for compliance and the significant risks for companies neglecting this obligation.
She expanded on the extension of such litigation to African claimants, citing instances in the Niger Delta, South Africa, and Zambia, emphasising the potential for ESG litigation in the SADC region. Vanessa also highlighted the broad scope of ESG litigation, covering diversity, corruption, labour practices, and climate preparedness, urging boards and directors to address ESG risks to prevent legal and reputational consequences. Lastly, she emphasised the role of climate litigation in shaping climate governance, positioning it as a vital force for climate justice amid energy crises and expansion.
Moderator Jessica Blumenthal also pointed out that in South Africa, there's a rising trend of activism spotlighting the gap between a corporation's climate goals and its actual actions and investments. To mitigate this risk, businesses must ensure that climate objectives are seamlessly integrated into all decision-making levels and be prepared to defend decisions seemingly divergent from overarching targets. She also shared that, amid these challenges and opportunities new considerations emerge, such as the competition law implications of industry collaboration for decarbonization and resilience.
Sustainable Financing in Project Development and Real Estate
Andreas Potgieter, executive in ENS | Namibia, presented on the profound impact of ESG principles on project development and the real estate industry, articulating three key drivers for their adoption.
Firstly, he highlighted the increasing integration of ESG language and standards into loan and grant finance, with lenders transitioning from financing projects with ESG objectives to setting ESG principles as conditions for accessing finance. This shift is exemplified by the issuance of green bonds and sustainability-linked loans by major banks in Namibia, financing renewable energy projects, and supporting sustainable real estate and affordable housing initiatives. Additionally, Jessica then pointed out that sustainable finance is witnessing a shift toward market standardisation, aligning with principles from organisations like the Loan Market Association ("LMA") and International Capital Market Association ("ICMA") or through the adoption of standardised clauses.
Secondly, Andreas dispelled the notion that financiers alone drive the adoption of ESG, pointing to the implicit alignment of the Urban & Regional Planning Act, 2018, with ESG principles. This regulatory framework focuses on sustainable development, environmental protection, and public participation.
Lastly, Andreas highlighted how adopting ESG principles can drive profitability in project and property development. ESG integration enhances market competitiveness and long-term value by reducing operational costs, boosting property value and occupancy rates, ensuring regulatory compliance, and promoting long-term sustainability. These factors emphasize the crucial role of ESG principles in ensuring the profitability and resilience of projects in the real estate and development sectors.
Paving the way forward
As we reflect on the valuable insights shared during the ESG Seminar in Windhoek, it's clear that the world is at a pivotal juncture in pursuing sustainability. ESG principles are not merely trends but critical elements shaping the future of business, governance, and development.
The way forward is both promising and challenging. With the global transition towards sustainability, we find ourselves on a transformative journey – addressing climate change, fostering responsible corporate citizenship, and enhancing economic growth.
At ENS, our commitment to driving this conversation remains resolute. We intend to keep the dialogue alive – to ensure that ESG principles are at the forefront of our clients' strategic decision-making.
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