Introduction
At a recent Founders Forum, a senior executive from one of Africa’s largest development finance institutions made a striking point:-
“The number one reason we pass on deals,” he said, “is not lack of innovation or even profitability. It’s weak governance. Investors will not touch a business that ignores it.”
That statement stayed with me. Too often, founders and directors focus on growth, sales, or branding, while overlooking the very factor investors scrutinise most: governance, sustainability, and responsibility
Investors want more than numbers. They want confidence that your business is managed responsibly, that its growth is sustainable, and that it understands its impact on people and planet. This is the heart of Environmental, Social and Governance (ESG) and Corporate Social Responsibility (CSR). Beyond profits, they want proof of integrity, sustainability, and governance. A polished balance sheet and profitable status may open the door but ESG and CSR are what keep investors at the table.
The Digest
Why ESG Defines Investor Decisions Today
In today’s investment climate, financial results alone no longer guarantee access to capital. Investors want more. A polished balance sheet may start the conversation, but it is governance, environmental stewardship, and social accountability that sustain investor trust.
Global funds and private equity houses now use ESG screening as a standard part of their due diligence. Closer to home, banks and regulators in Kenya are beginning to adopt similar benchmarks. The shift is clear.
Companies that lead in ESG and CSR don’t just access capital, they often secure it on better terms, with partners who are in it for the long haul.
The Legal Framework You Can’t Ignore
In Kenya, CSR and ESG expectations are anchored in existing legal frameworks. The Companies Act imposes fiduciary duties on directors to act in good faith and promote the long-term success of the company. Section 143 makes it clear that directors must consider not only shareholder interests but also the effect of business decisions on employees, communities, and the environment. This embeds CSR into corporate governance even though the law does not expressly use the term.
The Environmental Management and Coordination Act (EMCA) further heightens this responsibility by requiring Environmental Impact Assessments for projects that may significantly affect the environment. Non-compliance carries serious penalties and reputational damage. For forward-looking companies, compliance with EMCA is more than avoiding liability; it is a statement of commitment to sustainability that investors increasingly demand.
What Many Leaders Still Miss
Too many directors still treat ESG and CSR as peripheral. They are not. Governance is not a procedural ritual of holding meetings and recording minutes. It is the bedrock of investor confidence. Sustainability is not a slogan. It is a test of whether a business model can withstand market shifts, regulatory pressures, and stakeholder scrutiny. Social responsibility is not charity. It is proof that a business understands and values its stakeholders and the communities that support it.
As one observer put it:
“Most legal crises don’t erupt in the courtroom. They are seeded in the boardroom, whispered through rushed exits, and buried in undocumented processes. When leaders skip the ‘how’ in decision-making, they hand over the pen and let the court write the ending.”
Investors are paying attention to these fundamentals. They are no longer persuaded by glossy reports or polished mission statements. They want evidence that a company integrates ESG into its DNA.
The Investor’s New Lens
When investors conduct due diligence, their questions now cut deeper. They ask:
- Does your company have a credible and independent governance framework that mitigates risks of corruption or mismanagement?
- Is your board diverse, effective, and transparent in its oversight?
- Do your supply chains reflect ethical labor practices and tax transparency?
- Are there measurable sustainability goals aligned with climate and environmental expectations?
For many companies, these are not easy questions. They demand more than good intentions as they require robust structures, clear reporting, and legally sound strategies.
This is where the right legal and tax partner makes all the difference. Our commercial and tax practice works with boards and leadership teams to:
- Design and implement governance frameworks that inspire investor trust.
- Align corporate structures with ESG and tax transparency standards.
- Guide directors in fulfilling their legal duties while positioning the company for sustainable growth.
By anticipating the very questions investors will ask, we help businesses stand out as credible, compliant, and investment-ready.
Turning Compliance into Strategy
The shift from compliance to strategy is what defines leadership. Businesses that treat ESG and CSR as strategic assets attract capital on favourable terms, win regulator confidence, and build resilience. Those that continue to treat responsibility as an afterthought face not only investor hesitation but also reputational and regulatory risks.
CSR and ESG also create competitive advantage. They allow businesses to differentiate themselves, win stakeholder loyalty, and secure partnerships that open new markets. Transparency in ESG reporting builds trust, and trust remains one of the most powerful currencies in attracting investors.
How to Leverage ESG and CSR for Investment Growth
- Develop a Coherent Strategy: Align ESG and CSR with your corporate vision and stakeholder priorities. Set measurable goals so investors can track your progress.
- Report Transparently: Share your impact through reports and disclosures that demonstrate accountability and measurable results.
- Engage Stakeholders: Involve employees, communities, and regulators in shaping your strategy. Stakeholder buy-in translates into investor confidence.
- Integrate into Governance: Elevate ESG and CSR to the boardroom. When directors lead on responsibility, investors follow with confidence.
Conclusion
The message for CEOs and directors is unmistakable. Profitability alone no longer secures investor commitment. What secures it is the assurance that your company is governed responsibly, operates sustainably, and creates value for all its stakeholders.
At our firm, we understand that ESG and CSR are not just compliance matters but strategic levers for growth. We work with companies to design governance and sustainability strategies that meet legal standards, inspire investor trust, and position them as leaders in responsible enterprise.
In today’s marketplace, responsibility is no longer an option and investors are watching closely.
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Authors:
Waithira Mugo & Mike Ogutu.
Contact us : info@wmcoadvocates.co.ke
Disclaimer –This Article is in general terms for guidance only and is not intended to substitute professional advice. While due diligence has been undertaken, in ensuring the accuracy of information provided herein, Waithira M. & Co. Advocates is not responsible for any actions or omissions undertaken as a result of the same.
