DBJ to prep SMEs for financing with sustainability reporting

Development Bank of Jamaica, DBJ, will develop a sustainability reporting structure for local entities, particularly small companies trying to access certain levels of funding.

Sustainability reporting focuses on areas beyond financial reporting to incorporate ESG considerations, that is, how the business affects the environment, the society and its governance, said DBJ.

“The rationale for this requirement would be to encourage businesses to operate sustainably, ethically, and responsibly,” the state bank said.

In line with the global movement towards climate-friendly practices and sustainable use of the world’s resources, ESG considerations have moved into the mainstream of decision-making by financiers, including donor agencies and venture capital providers.

Few local companies are engaged in ESG reporting. But last month, food and finance conglomerate GraceKennedy released its inaugural ESG report, and with it seven lofty goals that would prepare it for eventual listing on a major United States-based exchange.

The DBJ last month chose ESG Partners Inc of Canada as its consultant to implement a sustainability reporting framework. In the long run, businesses will have to conform to the framework or go without certain funding.

“We anticipate that donor organisations, especially international development partners, may become more inclined to provide financial support and technical assistance to an institution that aligns with their development goals that have integrated environmental, social and governance factors as part of the organisation’s policy agenda,” said DBJ.

The DBJ added that the actual increase in donor funding will depend on the effectiveness of its initiatives and its ability to demonstrate tangible impact and results, which can only be achieved if our stakeholders are also on board with this initiative.

“It is conceivable that the DBJ may, in the future, require entities, including small businesses that are vying for its funding, to implement some level of ESG reporting,” the development bank said.

Already, the bank requires some information on governance for the ventures it backs, but once the framework is built out with its implementing partners, small businesses will be encouraged to broaden their reporting to include environmental and social impacts. Adopting ESG reporting will enable the enterprises to provide more transparency about their practices related to issues such as environmental sustainability, social responsibility, employee well-being, and corporate governance.

The US$99,600 contract with ESG Partners was signed in October, according to filings on DBJ’s website. It will last four months and is being executed through the Access to Finance for MSMEs Project.

ESG Partners is led by founder Nancy Foran, an accountant with over 25 years in the business. The company won the contract in an international open tender supervised by the World Bank. The other contenders were: PricewaterhouseCoopers Tax and Advisory Services; Environmental Management Centre Private Limited; Agoge Partners LLC; Dentons Group; joint bidders International Financial Consulting Limited, Insuco International Limited and A-Z Information Jamaica Limited; and another set of joint bidders, CH Business Consulting and Actman International Limited.

The Access to Finance for MSME Project for Jamaica, backed by the World Bank, focuses on enhancing the availability of loans and private credit, and setting up an SME fund for risk capital financing.

steven.jackson@gleanerjm.com