The Rwanda Capital Markets Authority (CMA) on Wednesday, September 11, launched a new Corporate Governance Code that incorporates environmental, social and governance (ESG) components.
A corporate governance code is a set of principles outlining the best practices in corporate governance and a guide for company directors and executives on how to handle governance.
The codes vary from one country to another, depending on legal and business contexts and evolve to adapt on the ever-changing business landscape.
Though yet to be gazetted, the new governance code builds on the existing Capital Market Governance Code of 2012.
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Studies show that while investors chase yields, they pay close attention to and have greater preference for companies that embrace good corporate governance, as they tend to realise higher returns, have better risk management and lower volatility.
Speaking at the launch of the governance code, CMA CEO, Thapelo Tsheole said that the corporate governance code will foster investor confidence.
"Confidence and integrity are crucial for the development of any capital market. Investors invest with the understanding that their money is in good hands and will remain in good hands. Good corporate governance structures inspire this confidence,” he said.
Tsheole added that Rwanda's capital market is in competition for capital, with investors spoilt for choice, hence the need for a competitive strategy.
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A copy of the new governance code obtained by The New Times indicates that the code will be mandatory for listed companies and issuers.
"All listed companies and all issuers of securities to the public or section of the public, regardless of the nature of their business, their shareholders and other stakeholders, shall apply the provisions of the Code and explain how the company has applied the provisions,” the code reads in part.
"Companies that intend to issue securities to the public or section of the public, other public companies, state-owned companies, private companies and small and medium sized enterprises are all encouraged to adopt the provisions of the code,” it adds.
Under the new code, companies will be expected to identify environmental and social risks and impacts, and design systems to help mitigate and manage them as part of sustainable business practices.
CMA will work with other institutions including the International Finance Corporation (IFC) to ensure the new code is understood and implemented and companies' performance measured against the code requirements.
The code will come into force after official gazettement.