ESG and Regulatory Frameworks Drive Energy Investments in Africa – Seplat CFO
Environmental, Social, and Governance (ESG) standards, along with regulatory frameworks in African countries, play a pivotal role in shaping the landscape of oil and gas investments across the continent. These frameworks influence project costs, compliance requirements, and risk profiles, guiding companies in their investment decisions.
Speaking at the Africa Oil Week (AOW) Conference & Exhibition in Cape Town, South Africa, Seplat Energy’s Chief Financial Officer, Mrs. Eleanor Adaralegbe, emphasized the impact of ESG factors on energy investments during a panel session on the theme, “ESG Investing: What Strategies Make African Deals Attractive in 2024?” She highlighted the importance of strong compliance and risk management practices for companies operating in Africa, stressing that aligning with ESG standards is crucial for long-term sustainability.
Mrs. Adaralegbe outlined several strategies for managing ESG risks, including thorough due diligence, alignment with international standards, stakeholder engagement, robust policy implementation, and transparent reporting. These actions, she noted, are essential for mitigating risks and building trust with stakeholders, ultimately leading to improved financing opportunities and successful projects.
“Clearly, ESG standards and regulatory frameworks in African countries significantly shape oil and gas investments. So, we need to take the right actions now. These actions not only mitigate risks but also create opportunities for enhanced stakeholder trust, improved financing options, and long-term project success,” Adaralegbe emphasized.
She also pointed out that investors use ESG benchmarks to evaluate potential projects, often excluding those that do not meet minimum standards. “Comprehensive due diligence is conducted to identify ESG risks, including environmental impact, community relations, and governance practices,” she explained, citing frameworks such as the Equator Principles and the International Finance Corporation (IFC) Performance Standards as critical tools for assessment.
Seplat Energy, according to Adaralegbe, has been proactive in preparing for these ESG requirements, with leadership from a dedicated board committee and a Sustainability Management Committee chaired by the CEO. She stressed the need for energy companies to build sustainable businesses through social development, environmental care, and transparent reporting, all while maximizing shareholder returns.
As the energy transition progresses in Nigeria, Seplat Energy is focusing on natural gas developments as a bridge to renewable energy. The CFO noted that investors are increasingly interested in carbon offset initiatives tied to oil and gas operations, which can help mitigate climate impacts.
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“ESG criteria are integrated into the investment process through rigorous screening, due diligence, and ongoing monitoring, with a focus on environmental impacts, social responsibility, and governance practices,” Adaralegbe stated. She emphasized that these considerations influence the structuring and valuation of oil and gas deals in Africa, impacting risk perception, financing options, and overall project attractiveness.
“Strong ESG performance can lead to favorable financial terms and is key to the long-term viability of any business, while poor ESG practices can result in reduced valuations, higher costs, and a limited pool of potential investors,” she added.
Adaralegbe concluded by stressing that navigating the complex landscape of ESG and regulatory requirements in African countries is essential for companies aiming to maintain compliance and manage risks effectively, making ESG considerations a decisive factor in the success of energy investments on the continent.
