Introduction

It is an indisputable fact that climate change has become a challenging threat to the very existence of living things in the world today as its effects are ubiquitous. No one can confidently say they are unsusceptible to the climate change effects, be it individually or collectively. How the world can live to see the near future is quite uncertain.

Over the years, human activities have played a significant role in inducing rapid climate change, leading to social challenges and significant increases in negative impacts on the environment, as currently experienced. All these have caused a shift in the world and brought a different level of expectation towards organisations by governments, investors and society at large. Corporate achievement or success is measured beyond simply financial or economic wealth margins. Questions are posed on how and what an organisation does to mitigate climate change risks in its daily operations. In that light, concepts such as Environmental, Social and Governance (ESG) and Corporate Social Responsibility (CSR) have become crucial terms, continuously placed as essential requirements in bringing accountability to businesses in support of climate and environment preservation and social responsibility.

ESG in Tanzania

In simple terms, ESG is the way an organisation or business is structured and operates to positively contribute to society by addressing ESG challenges and minimizing its negative impacts on the environment. It is not a brand-new concept as its main goal is to ensure that organisations have sustainable business practices, are ethical and accountable in managing impacts on the environment caused by their business activities, ensure the wellbeing of their employees, and contribute to social and political issues.

Notably, there have been efforts made towards sustainable practices in various countries and Tanzania has been no exception. For instance, from 2015 to date, several laws have been amended to introduce or expand responsibility of both people and corporations towards sustainable business practices in areas such as mining, petroleum, oil and gas, natural resources, banking and the financial sectors in which CSR has also become a compulsory component in governance. Tanzania is also a pioneer in promoting the United Nations Sustainable Development Goals (SDGs) which include tackling climate change, provision of clean water and sanitation, supply of affordable and clean energy, and building sustainable cities and communities.

Recently, the publication of the Public Private Partnership (Amendment) Regulations, 2023 has been of notable significance. The Regulations have amended the Public Private Partnership Regulations of 2020 to the effect that the new amendments are geared towards building climate-smart public private partnership (PPP) projects. This includes requirements for information on the contribution of the PPP projects towards climate change responsiveness, adaptation measures and climate change risk exposure in the pre-feasibility studies before the same are approved by the PPP Centre. Effective enforcement and compliance of the Regulations could lead to exemplary achievement by PPPs on climate change goals.

Sustainability in finance

Appreciatively, the banking and financial institutions have made the front line in investing in and innovating climate-sensitive products and services to create ESG awareness, promote United Nations SDGs and boost environmental and social development in Tanzania. The Bank of Tanzania, a regulator of all banks and financial institutions, issued its Guidelines on Climate-Related Financial Risks Management in 2022 aimed at assisting banks and financial institutions with how they should approach climate-related financial risks and address and mitigate their impacts. Among other things, banks and financial institutions are supposed to incorporate sound governance and risk management frameworks for climate-related financial risks that would assist with their accountability to themselves and society.

Banks and financial institutions have been more than ready to implement these requirements. In 2022, NMB Bank PLC issued the Debut Jasiri Gender Bond which reaffirms its efforts towards sustainable development, with positive impacts on female clients and part of its broader ambition to meet the SDGs. Likewise, in 2023, CRDB Bank PLC, one of the major commercial banks in Tanzania, launched its first green term bond known as "Kijani Bond/Green Bond" which has been listed on the Dar es Salaam Stock Exchange. The Kijani Bond has offered a distinct investment opportunity to Tanzanians with a 10.25% interest rate. Interestingly, the Kijani Bond subscription soared to a remarkable 429.55% which shows the movement made by such huge financial intermediary into sustainability. To this end, ESG has become an essential requirement in the operations of banking and financial institutions.

Need for more action?

Notwithstanding the above, it is evident that ESG as a sustainable practice is an uncharted domain in Tanzania from laws, policies and implementation strategies made by both the government and businesses alike. Despite the opportunity ESG presents to lawyers, financial advisers, investment advisers, business consultants and government regulators, there is minimal understanding as to what the term truly entails and how the same can be merged into firm policies, products and services. It is evident that implementation of sustainability practice into businesses and organisations can be further promoted through integration of ESG into laws, policies, taxation, and production of goods and services.