How ESG, Regulatory Frameworks Drive Energy Investments In Africa, By Seplat CFO

How ESG, Regulatory Frameworks Drive Energy Investments In Africa, By Seplat CFO

By Edu Abade

Environment, Social and Governance (ESG) standards and regulatory frameworks in African countries significantly shape oil and gas investments in the continent, as they influence costs, compliance requirements, and project risk profiles.

The Chief Financial Officer of Seplat Energy, Mrs. Eleanor Adaralegbe, said this during a panel session at the Africa Oil Week (AOW) Conference and Exhibitions in Cape Town, South Africa.

Eleanor, who spoke on ESG Investing: What Strategies Make African Deals Attractive In 2024?, said to ensure compliance and manage ESG-related risks effectively, companies should conduct thorough due diligence, align with international standards, engage with stakeholders, implement robust policies and maintain transparent reporting.

“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,” she stated.

She also pointed out that investors assess potential projects by screening them against ESG benchmarks, of which projects that fail to meet minimum ESG standards are often excluded, adding: “Comprehensive due diligence is conducted to identify ESG risks, including environmental impact, community relations, and governance practices. Investors may use frameworks like the Equator Principles or International Finance Corporation (IFC) Performance Standards.

“In this regard, Seplat Energy is ahead, proactively setting up to ensure readiness very much aligned with Strategy. Seplat Energy has shown commitment, which is driven by the top board, a special board committee on ESG matters, and a sustainability management committee chaired by the Chief Executive Officer (CEO).”

Eleanor advocated the need for operators in the energy space to build a sustainable business through social development, focusing on environmental care and reporting as well as maximizing returns for shareholders.

With a mission to deliver the energy transition in Nigeria through upstream, midstream, and new energy pillars, she identified the roles of strong governance and HSE, as is the case with Seplat Energy’s operations in Nigeria.

She further explained that investors are increasingly pushing for energy transition projects, such as natural gas developments that serve as a bridge to renewable energy, with also a growing interest in carbon offset initiatives linked to oil and gas operations, which could help mitigate climate impacts.

“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. Investors in African oil and gas projects are particularly concerned with climate impact, community relations, regulatory compliance, and transparency.

“ESG considerations significantly influence the structuring and valuation of oil and gas deals in Africa by affecting perceived risks, financing options, and project attractiveness. Strong ESG performance can lead to favourable 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 stated.

Speaking further, she noted: “ESG standards and regulatory frameworks in African countries significantly influence investments by shaping the operational requirements, risk profiles, and overall attractiveness of projects.

“Companies must navigate a complex landscape of varying regulations and expectations related to environmental protection, social development, and governance to ensure compliance while managing ESG-related risks effectively.”