G7 TASKFORCE REPORT & RECOMMENDATIONS: What Relevance to the Nigerian National Advisory Board on Impact Investing (NABII)?

Preamble

 

The following report, which summarises the conclusions reached by theG7  Impact Taskforce (ITF), shows how private capital can be deployed to facilitate and support sustainable growth and development globally. It also demonstrates the imperative for urgent actions, as well as makes practical recommendations for effective and timely actions on the part of stakeholders such as governments, private sectors, capital markets, regulators, civil societies organisations etc. How can the Nigerian National Advisory Board on Impact Investing (NABII) proactively promote its agenda to deliver sustainable growth and development in the impact investing ecosystem in Nigeria?

 

Executive Summary 

 

Established in July 2021,  the Impact Taskforce (ITF) aims to promote sustainable and impact-driven economies and societies worldwide by addressing the following twin questions (or challenges): 

  1. a) speeding up the volume and effectiveness of using private capital to create a positive impact on communities, societies and the environment; and 
  2. b) to ensure that this growth and development are substantive, lasting and inclusive of all potential beneficiaries – be they individuals, families, communities or entire societies.

 

– Towards these ends, the ITF decided on two specific themes (or Workstreams)  representing key enablers in actualising scale: the first is ‘TRANSPARENCY,  INTEGRITY AND HARMONISATION FOR IMPACT, which entails addressing the issues of impact transparency, global harmonisation of standards, and ways of ensuring the integrity of data, analysis, and governance. The second stream, ‘INSTRUMENTS AND POLICIES FOR FINANCING THE SDGS AND A JUST TRANSITION’ entails putting in place mechanisms for aligning various investment vehicles across asset classes to facilitate a seamless transition to a future that is both equitable and sustainable in the long term.  

The Report recommended the following pathways  to bring about this paradigm shift?: 

  1. Transform the quality and transparency of impact information, and 
  2. Mobilise greater amounts of institutional capital in the quest for positive impact.

 

Given the critical importance of the second pathway, in particular,  the ITF makes the following six observations: 

  1. The need to support and participate in the work of the International Financial Reporting Standards Foundation’s International Sustainability Standards (IFRS-ISSB for short) in its efforts to create a global reporting “baseline” on impact related to enterprise value
  2. Consolidation of reporting baseline. How?  Through changes across the corporate ecosystem such as company law, the scope of executive duties, disclosure, and standards to cover all impact data, not just enterprise-related data
  3. Mandatory accounting for impact as a destination. The journey to this goal, the report says, will require greater transparency, building on harmonised standards and strong mechanisms to ensure the integrity of data, analysis, and governance
  4. Coordinated, urgent movement to remove multiple external and internal barriers currently militating against the flow of transformational capital to emerging and frontier economies
  5. Integration of environmental and social factors. This must incorporate the following 3 Just Transition Elements:
    1. Advancing Climate and Environmental Action; 
    2. Improving Socioeconomic Distribution and Equity; and
    3. increasing Community Voice. 
  6. Support for the Mobilisation of Capital: The role of Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) particularly those that count G7 members among their shareholders, is of critical importance.

 

Call to Action

 

Given the above, the report proposes a host of short and medium-term recommendations for action by governments, capital market regulators, investors, public and private enterprises, as well as trendsetters and non-governmental organisations (NGOs) to ensure that the potential contribution of public and private-sector investors to achieving a Just Transition is fully realised.

 

What are Instruments and Policies for Financing the SDGs and a Just Transition?

The work of the ITF is underpinned by the understanding that the achievement of global priorities such as the SDGs and delivering on an inclusive recovery from the Covid-19 pandemic will require increased cooperation and innovative forms of partnerships between governments, the private sector and civil society. Hence, the Report explored this imperative within the context of supporting the development of specific instruments and policies for financing the SDGs and a Just Transition. Aside from stressing the need to harness the power of financial markets for the public good,  the Report also stressed the necessity of a holistic approach to a Just Transition that addresses the socio-economic impact of climate change on people, especially women. To accomplish this, the ITF recommends: 

  1. Addressing barriers hindering the large mobilisation of institutional transformational capital to impact.
  2. Mobilising institutional capital, from the full range of institutional actors in pursuit of positive impact and advancing the SDGs by increasing significantly the use of relevant instruments and tools to address real barriers for private capital participation; and encouraging more private-sector capital to flow to emerging markets.
  3. Breaking down silos between climate-first and social-first strategies and transactions, and strengthening the participation of local Community Voice to advance a just transition.

 

G7 Report: Urgent actions for the Nigerian National Advisory Board on Impact Investing and the Private Sector players  

  1. Engage with government agencies such as the Ministry of Finance Budget and National Planning,  to support the above-mentioned IFRS-ISSB, as well as participate in upcoming consultations aimed at strengthening the impact investing market and bringing integrity to it.
  2. Engage other stakeholders (such as capital market regulators; ICAN; the Central Bank of Nigeria;  Investors and SMEs, as well as large corporations in building on the reporting baseline
  3. Mobilise domestic capital from institutional investors for impact investing and pool domestic capital to work alongside international sources of finance.
  4. Drive an inclusive, fair, and equitable transition that does not exclude or marginalise poor or disadvantaged populations – using the 3 elements of a just transition as discussed above.  
  5. Prioritise environmental and climate action in partnership with the Nigerian Meteorological Agency (NIMET),  the Federal Ministry of Environment and investors, and mobilise funds from investors to achieve the stated goal of net-zero emissions as articulated in the 2021 COP 26 conference. 
  6. Improve socioeconomic distribution and equity,  in partnership with government, SMEs/social enterprises,  investors and civil society organisations. 
  7. Increase community voice in conjunction with CSOs and philanthropic organisations. 
  8. Mobilise capital by enhancing the role of Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs), particularly those of which G7 members are shareholders,  using a range of proven tools and instruments more actively.

Conclusion

 

The recommendations of the G7 Taskforce present opportunities that the Nigerian NABII in collaboration with key private sector players to strengthen the impact investing market and unlock the flow of both domestic and international capital. Specific actions will require in-depth analysis of the current socio-economic state of Nigeria and approach the recommendations from a contextual and research-based standpoint. 

To this end,  an implementation plan in line with the G7 Recommendations in a manner that embraces the two priority areas highlighted in the Report, namely:  Transparency, Integrity, and Harmonisation for Impact; and  Instruments and Policies for Financing the SDGs and a Just Transition, following the current realities and peculiar circumstances of Nigeria.

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