FRC urges insurance, financial institutions to adopt sustainability reporting ahead of 2028 deadline

The Financial Reporting Council of Nigeria (FRC) has called on insurance companies and other financial institutions to adopt sustainability reporting ahead of the mandatory compliance period set for 2028.

This call was made during the Industry-Specific Workshop on the Implementation of ISSB’s IFRS S1 & S2 for insurance companies and other financial institutions in Nigeria, held in Abuja.

Speaking at the event, Rabiu Olowo, Executive Secretary/CEO of the FRC, who was represented by Iheanyi Anyahara, Coordinating Director of Accounting Standards and Sustainability Reporting, emphasized the importance of sustainability reporting in today’s financial landscape.

He highlighted that sustainability reporting is no longer optional but a compliance necessity, particularly in light of growing global concerns over climate change and environmental sustainability.

“Sustainability reporting is the practice of disclosing an organization’s environmental, social, and governance (ESG) performance and the impact of its activities. For insurance companies and other financial institutions, sustainability reporting is crucial as it enables them to demonstrate their commitment towards responsible business practices, sustainable principles, risks and opportunities,” Olowo stated.

Olowo revealed that, despite the significance of sustainability reporting, no insurance company or non-banking financial institution has yet joined Nigeria’s adoption roadmap. He urged these institutions to take advantage of the ongoing voluntary adoption phase, which runs from 2024 to 2027, to prepare for the mandatory compliance period starting in 2028.

He further stressed that climate change, social responsibility, corporate governance, data protection, and financial inclusion are key aspects that organizations must integrate into their sustainability reports.

The FRC outlined several benefits that financial institutions stand to gain from adopting sustainability reporting, including Regulatory Compliance. Transitioning from voluntary ESG disclosures to mandatory compliance will ensure organizations meet evolving regulatory expectations.

Enhanced Reputation: Early adopters of sustainability reporting will gain global recognition, strengthening their brand value.

Better Decision-Making: Transparent reporting helps organizations identify areas for improvement and make informed strategic decisions.

Improved Stakeholder Trust: ESG disclosures build confidence among investors, customers, and employees.

“Cost and Tax Savings: Shifting towards sustainable energy sources can lead to long-term cost reductions, while tax incentives for capital expenditure can further benefit businesses.

“Risk Management: Identifying and addressing sustainability risks can enhance financial resilience and stability.

“Access to Capital: Investors are increasingly considering ESG factors when making investment decisions, and sustainability reporting provides critical insights for potential funding.

“Innovation and Growth: The reporting process can uncover new opportunities for sustainable business development.”

Reiterating the urgency of adopting sustainability reporting, the FRC emphasized that the impacts of climate change make ESG compliance a necessity, not just a corporate social responsibility effort and organisations that fail to integrate sustainability into their business models risk regulatory penalties, reputational damage, and loss of investor confidence.

Also speaking at the event, Innocent Okwuosa, Chairman of the Nigerian Integrated Reporting Committee (NIRC), also spoke at the event and emphasized the importance of sectoral training in the transition to sustainability reporting. He explained that the workshop is part of a larger effort to build expertise across various industries, following similar initiatives held for banks, oil and gas, and telecom companies last year.

“This year, we started with the insurance industry, and after this, we will move to other sectors, such as manufacturing. The insurance industry plays a crucial role because they underwrite risk in the country, and sustainability risks are becoming a major factor in financial and business decisions,” Okwuosa stated.

“Insurance companies are key players in sustainability because they underwrite climate-related and clean energy projects. This workshop is designed to build sector-specific expertise, enabling them to effectively implement IFRS S1 and S2,” he added.