Silvana is a Certified Public Secretary at Capita Registrars and an advocate at Silvana Wanjiru & Associates Advocates based in Nairobi, Kenya. The firm offers corporate and commercial law services to firms. She attained her Bachelor of Laws Degree from the University of Nairobi, Kenya. Silvana began her career at Muthoga Gaturu & Co. Advocates, a leading medium sized law firm in Nairobi, Kenya. She thereafter joined the Retirement Benefits Authority as a temporary legal Assistant before joining the Nairobi Securities Exchange as a Compliance Assistant. She was appointed an Officer, Compliance & Legal in May 2011. Silvana is professional in her work and has worked on several projects in the Nairobi Securities Exchange. Key among them the Demutualization of the Nairobi Stock Exchange Limited.

1. The African CEO Round-table &
Conference on Corporate Sustainability &
Responsibility AR-CSR CONFERENCE
Corporate Social
Responsibility and Stock
Market Efficiency

2. “The social responsibility of
the firm is to increase its
profits”
Milton Friedman

3. Stock market efficiency
Efficient market hypothesis suggests that rational investors
consider all publicly available information when buying or
selling a firm’s share.
There is increasing evidence of the emergence of the
Socially Responsible Investor. There are 1,200 signatories
to the Principles for Responsible Investment (PRI) Initiative
controlling about US $ 34 Million in investments (PWC
investor survey, PRI Website)

4. Impact of CSR on investment decisions
In this discussion, we explore the impact of CSR on investment
decisions. CSR reporting is no longer “niche” reporting. Investors as
well as analysts are starting to use CSR information to make
investment decisions.
In many countries in the world, as CSR has evolved beyond charitable
giving into incorporating Ethics, Social and Governance factors in
reporting, CSR rating is becoming an integral part of the financial
markets.
“In the last ten years, assets under management of socially responsible
investors grew considerably: funds in the United States, United
Kingdom and Canada grew by $400, $600, and $400 billion
respectively, between 2001 and 2007” Harvard Business Review
Research

5. Is there any evidence?
An institutional investor survey (May 2014) conducted by
PWC show that investors are considering sustainability
issues for the following major reasons;
1. Risk Mitigation
2. To avoid firms with unethical conduct
3. To enhance performance
4. To have through reduction of environmental impact
5. To attract new capital
6. Impact on capacity to create value
7. Be responsive to interest groups.

6. Does CSR influence markets
I posed a question to a few market intermediaries in Nairobi.
Would a CSR announcement influence the share price of a
company listed at the Nairobi Securities Exchange?
Although CSR is important, it is not indicative as to whether
investors in Nairobi would be influenced to make a decision to
buy/sell shares following a CSR announcement.
But is that the reality in the rest of the world? In the US, it is
reported that being deleted from the Calvert Social Index (CSI)
could result in a loss of US4 Billion in market capitalization on
the day and the day after such an announcement. No such effect
was found on addition to the Index.

7. Does CSR influence markets
The Public Investment Corporation (PIC), South Africa’s
largest investment fund owned wholly by the Government
of South Africa.
The Public Investment Corporation (PIC) investment at the JSE is
about 13% market capitalization. In investing, the corporation insists
that investments are done responsibly through the integration of ESG
issues in the investment process. The PIC and fund managers have
adopted the principles of CRISA. (PIC Website)
This has an overall effect on the liquidity of the market.

8. Role of exchanges in sustainable
reporting
In African Stock Exchanges, Johannesburg Stock
Exchange requires listed entities to produce an integrated
report or explain why they cannot.
Many listed firms may view CSR reporting as an additional
cost that would impact the financials of the company.

9. Does CSR influence markets?
Research has shown that entities that encompass CSR
achieve better financial results, which are used to measure
business efficiency, so it is certain that corporate social
responsibility has a positive effect on efficiency and vice
versa, that higher efficiency enables and stimulates
corporate social responsibility.

10. Role of Exchanges in CSR
• Are investors looking to invest in a company that has a good
sustainability record?
• Each country has different measures for sustainability e.g. a
country with significant mining/extraction works would give high
ranking to environmental consideration.
• The sustainability strategies currently in use by stock
exchanges and listing authorities around the world fall into
three broad categories: 1) requiring that companies meet
specific ESG disclosure requirements in order to list on an
exchange – either initially or on an on-going basis; 2) providing
sustainability products and services in the form of sustainability
indices; and 3) creating markets for specialised products such
as carbon trading or cleantech investment. (Sustainable Stock
Exchanges Initiative website)

11. Africa & Sustainability reporting
• Companies in Africa still lagging behind in sustainability
reporting.
• African stock exchanges that are part of the Sustainable
Stock Exchanges
• Johannesburg Stock Exchange ( SRII Index)
• Egyptian Exchange
• Nigerian Stock Exchange

12. Adoption of sustainability reporting
-major concerns
• Is it too expensive for a company to do sustainability
reporting?
• Does this add to the bottom line of the company?
• Why should a company invest in sustainability reporting?
• How many countries in Africa have adopted sustainability
reporting
• Can an exchange encourage a investors/shareholders to
absorb issues of CSR while investing in a company?
• Investors are usually looking for a good returns, does a
socially responsible company mean that the company will
have a good return.

13. Relationship between CSR and share
price performance
No study has conclusively established the connection
between CSR and good performance of share price of a
company.

14. Sustainability
Strong corporate performance on sustainability indicators
provides a competitive edge.
By reducing risk it strengthens access to credit markets.
Strong personnel relations improve productivity.
Reputable corporate standing in the community builds
consumer loyalty and positive branding.

15. Case Studies: SOUTH AFRICA
• The Johannesburg Stock Exchange (JSE) measures
sustainability through the use of Socially Responsible
Investment Index (SRII) .
• The Criteria used to establish the SRII is based on;
• Environment
• Society
• Governance and related sustainability concerns

16. Case Studies: Kenya
The Capital Markets Authority in Kenya has developed a
code of governance for listed companies.
Interviews with market intermediaries show that though the
institutional investors are keen on corporate governance
issues especially the establishment of boards, mainstream
ESG issues are still not a strong consideration when
making investment decisions.
Ninety-three percent of the Kenyan listed companies fund
education-centric CSR programmes -African sustainability
barometer

17. Conclusion
Findings from the Ernst & Young Institutional Investor
Survey (March 2014) show that:
Investors are already factoring in ESG information when
making investment decisions, but want that information to
be relevant and material.
When making an investment decision, only a minority of
investors currently conduct systematic assessments of
non-financial information.

18. Conclusion
There is a real need to improve non-financial information,
to make sure that it is:
1. Relevant
2. Consistent
3. Comparable
4. Balanced
5. Linked to the organization’s financial performance

19. AR-CSR 2014