Reimagining Corporate Governance: Paving the Way for Sustainable Pension Schemes

Ms Omolola Oloworaran, The PenCom DG

Over the past two decades, Nigeria’s Contributory Pension Scheme (CPS) has witnessed remarkable growth, largely attributed to the adoption of robust corporate governance practices. This evolution underscores the imperative for Pension Fund Operators (PFOs) to embrace sustainability-focused governance to ensure the continued prosperity of the Nigerian pension industry.

At the 2024 Annual Corporate Governance Conference organized by the Society for Corporate Governance Nigeria (SCGN) in Lagos, the Director-General of the National Pension Commission (PenCom), Ms. Omolola Oloworaran, delivered an insightful address titled “Corporate Survival and Sustainability: The New Face of Governance.” Represented by the Commission Secretary/Legal Adviser, Muhammad Sani Muhammad, Ms. Oloworaran highlighted the transformative shift in corporate governance within the Nigerian pension sector.

The Evolution of Corporate Governance in the Pension Industry

Ms. Oloworaran emphasized that modern corporate governance transcends traditional profit-centric models, now integrating Environmental, Social, and Governance (ESG) criteria. This paradigm shift is particularly significant for Nigeria’s pension industry, which has experienced rapid expansion since the CPS’s inception in 2004. As of August 2024, pension assets have soared to N21.25 trillion, positioning pension funds as pivotal players in Nigeria’s capital market through substantial investments in fixed-income securities and equities.

A testament to this evolution is the NGX Pension Broad Index, launched in collaboration with PenCom in 2023. This index aims to promote diversification by providing a comprehensive measure of pension fund equity portfolios, moving away from traditional concentrations in sectors like Banking, Consumer Goods, and Industrial Goods. Such initiatives reflect a broader objective: positioning pension funds as active stewards of corporate governance, thereby shaping Nigeria’s business landscape through responsible investment.

The Imperative Role of ESG in Pension Governance

In her discourse, Ms. Oloworaran underscored that ESG considerations are now fundamental to corporate governance, influencing both decision-making processes and investment strategies. ESG frameworks offer a structured methodology for assessing a company’s financial health and sustainability, encouraging pension funds to prioritize organizations committed to ethical and responsible business practices. This alignment with global trends signifies a proactive approach, where pension funds meticulously evaluate how companies manage environmental risks, employee relations, community engagement, and shareholder interests.

By integrating ESG factors, Nigerian pension funds can mitigate long-term risks, enhance their reputational standing, and ensure robust financial performance. Ms. Oloworaran articulated this sentiment, stating, “ESG isn’t just a trend; it’s an imperative for pension funds committed to securing value for retirees and supporting a sustainable economy.”

Advancing Sustainable Investment Practices

Sustainability in the pension industry entails building resilience against economic, social, and environmental challenges. Ms. Oloworaran advocates for diversified investments, particularly in renewable energy and innovative technology sectors, to bolster fund stability and contribute to national economic development.

To uphold exemplary governance, PFOs are encouraged to proactively adapt to evolving regulatory standards, viewing compliance not merely as a formality but as a strategic necessity. Engaging actively with stakeholders—including employees, communities, and regulators—is essential to foster transparency, trust, and accountability.

To further entrench sound governance within the pension industry, Ms. Oloworaran proposed several key initiatives:

• Development of a Stewardship Code: This would serve as a guideline for PFOs to engage actively with investee companies, advocating for governance standards that align with long-term value creation.
• Establishment of a Pension Leadership Council: Envisioned as a platform for pension funds to consolidate their influence, engage with regulators, and provide oversight on governance matters within investee companies.
• Implementation of the Nigerian Sustainable Pension Principles: Designed to guide PFOs in incorporating ESG criteria into risk management and investment decisions, ensuring that pension funds contribute meaningfully to sustainable economic growth.

Ms. Oloworaran’s presentation delineates a strategic pathway toward a more responsible and sustainable Nigerian pension industry—one that leverages ESG principles, fosters stakeholder engagement, and exemplifies leadership in a dynamically evolving market.

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