What Kenya’s New CMA ESG Code Means for Listed Companies

Kenya’s Capital Markets Authority (CMA) has approved a new ESG Code for Issuers of Securities, marking one of the most significant corporate governance reforms for the Nairobi Securities Exchange (NSE) in years. Developed with the International Finance Corporation (IFC) and the NSE, the Code moves listed companies away from box-ticking compliance and toward embedding environmental, social and governance (ESG) considerations directly into board strategy, risk management and executive pay.

What Is the CMA ESG Code?

The CMA ESG Code Kenya framework sets out governance expectations for issuers of securities on the NSE, built around an “apply and explain” model: companies must apply the Code’s principles or publicly explain why they have departed from them. It draws on G20/OECD corporate governance principles and is designed to align Kenya’s capital markets with the country’s Sustainable Development Goals and broader sustainable finance agenda.

This is not Kenya’s first move on ESG disclosure  the NSE’s ESG Disclosures Guidance Manual has been in place since 2021  but the new Code goes further by making ESG a formal governance requirement rather than a voluntary reporting exercise.

Key Requirements for Listed Companies

  • ESG embedded into board strategy, enterprise risk management, internal controls and executive remuneration.
  • Executive pay linked to ESG performance metrics alongside financial results, including clawback provisions for misconduct.
  • Stronger board independence  independent directors lose that status after six years of continuous service.
  • Measurable diversity objectives covering gender, skills and experience at board level.
  • A documented ESG framework supported by annual sustainability reporting.
  • An “apply and explain” disclosure model for any departure from the Code’s principles.

Compliance Timeline

The draft Code was approved on 13 July 2026 and is currently moving through public participation ahead of final gazettement. Once finalised, listed companies will have one year to implement the mandatory provisions  a relatively short runway given the scope of the governance, remuneration and reporting changes involved.

Why This Matters Beyond Compliance

Investors increasingly price governance quality into the cost of capital. A well-implemented ESG governance framework signals to shareholders, lenders and international investors that a company is managing long-term risk responsibly  not just meeting a regulatory minimum. Companies that treat the Code as a genuine strategic exercise, rather than a compliance formality, stand to benefit from stronger investor confidence and easier access to sustainability-linked finance.

How Listed Companies Can Prepare

  • Run a gap assessment of current governance practices against the Code’s requirements.
  • Conduct or refresh a materiality assessment to identify the ESG issues most relevant to the business.
  • Build board and executive capacity so directors can exercise informed oversight of ESG matters.
  • Put in place credible data and reporting systems ahead of the annual sustainability reporting requirement.
  • Review remuneration policy to embed ESG-linked metrics and clawback mechanisms.

Lybra supports listed companies through this process, from board training under our Capacity Building programmes to building disclosures through our Sustainability Reporting service.

Frequently Asked Questions

When does the CMA ESG Code take effect?

The Code was approved in draft form on 13 July 2026 and is undergoing public participation. Mandatory provisions will apply within one year of final gazettement.

Which companies must comply?

The Code applies to issuers of securities listed on the Nairobi Securities Exchange.

What happens if a company doesn’t comply?

The Code follows an apply-and-explain model, meaning companies must either apply its principles or publicly justify any departure. Persistent non-compliance carries reputational and regulatory risk with the CMA and NSE.

How is the ESG Code different from the NSE’s ESG Disclosures Guidance Manual?

The 2021 NSE Guidance Manual focused on voluntary ESG disclosure. The CMA ESG Code goes further by embedding ESG into formal corporate governance requirements, including board composition, risk management and executive remuneration.

Preparing for Kenya’s ESG governance reforms doesn’t have to be daunting. Get in touch with Lybra’s advisory team to discuss a readiness assessment tailored to your board.

This article is provided for general informational purposes only and does not constitute legal, financial, or professional advisory advice. While every effort has been made to ensure accuracy at the time of publication, regulatory frameworks and requirements referenced here may change. Organizations should seek tailored guidance from Lybra or a qualified professional before making decisions based on this content.