1 . How is “ESG” in your jurisdiction defined in a corporate/commercial context, and what are its major elements?
In The Bahamas, particular emphasis is placed on “Environmental” and “Governance.” The Environmental emphasis is fairly new and can be attributed to global attitudes shifting towards protecting the environment. The Bahamas has considered its impact on the global environment with the introduction of new environment-focused legislation (see below, Questions 2 and 3). Emphasis on Governance is something that has always been present. As it constantly evolves, it can be better traced. This emphasis is evident through our legislation, which continues to be updated, and the existence of various regulatory entities.
Governing regulatory bodies include:
- Central Bank/Inspector of Banks and Trust Companies, responsible for, inter alia, monetary stability, encouraging economic development, safeguarding a stable, adequate financial system and ensuring proper supervisory oversight for supervised financial institutions.
- Securities Commission of The Bahamas/Inspector of Financial and Corporate Service Providers, responsible for, inter alia, regulating and overseeing investment funds, securities and the capital markets and ensuring that all persons operate in accordance with the Financial and Corporate Service Providers Act, 2000, which provides for the licensing and regulation of financial and corporate service providers.
- Compliance Commission of The Bahamas, responsible for, inter alia, maintaining a general review of financial institutions (inclusive of Designated Non-Financial Business and Professions (DNFBPs)) in relation to the conduct of financial transactions and to ensure compliance with the provisions of the Financial Transactions Reporting Act, 2018 (FTRA), and that financial institutions and DNBPs meet best international standards and practices, consistent with the provisions of Bahamian Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) and Countering/Proliferation Financing (CPF) legislation.
- Insurance Commission of The Bahamas, responsible for, inter alia, surveillance over the insurance market as well as promoting and encouraging sound and prudent insurance management and business practices.
- Utilities Regulation and Competition Authority (URCA), responsible for, inter alia, the Electronic Communications Sector (ECS) and the Electricity Sector (ES). In the ECS, URCA issues licences and exemptions, manages state assets and applies competition law rules. As regulator of the ES, URCA is responsible for all persons and/or entities that generate, transmit, distribute or supply electricity to, from or within The Bahamas.
- Bahamas Maritime Authority, which aims to promote, facilitate and encourage the development of ship registration and maritime administration, to regulate control and administer all matters related to merchant shipping, to participate in international organizations and other meetings dealing with maritime-related matters, to develop the maritime industry of The Bahamas, to expand and create maritime employment opportunities for Bahamians and to advise Government on any matter relating to merchant shipping, marine pollution prevention and control.
2 . What, if any, are the major laws/regulations in your jurisdiction specifically related to ESG?
Major laws relative to ESG include the Environmental Planning and Protection Act, 2019 (EPPA) whose objective, inter alia, is to “protect the environment of The Bahamas while providing for development in a way that maintains ecological integrity and the social and economic welfare of local communities.” The EPPA makes it mandatory for an individual or entity to obtain a government-issued Certificate of Environmental Clearance before they can start working on a building project where there will be man-made change to the environment. This is to better regulate construction and its effects on the environment in the jurisdiction.
More recently, the Climate Change and Carbon Markets Initiatives Bill, 2022 and the Carbon Credit Trading Bill, 2022 have been tabled. One of their biggest objectives, if passed, would be to regulate carbon trading in the jurisdiction.
The Central Bank of The Bahamas Act and the Banks and Trust Companies Regulation Act of 2000, which dictate the governance of the Central Bank, one of the biggest regulatory entities in this jurisdiction, received an overhaul in 2020. They were amended to align with the best international practices and to maintain a durable financial system.
The FTRA requires all institutions, which in their day-to-day function administer and manage funds on behalf of others, to perform due diligence measures and keep records of risk assessments when conducting business with a new client. The FTRA also requires the reporting of anything that warrants suspicion upon the performance of risk assessments and due diligence measures, along with any other suspicious transactions.
The Commercial Entities (Substance Requirements) Act, 2018 requires certain relevant entities in this jurisdiction to submit annual economic substance reports. In certain circumstances, those reports must detail gross income, amount of expenditure, number of employees, etc. to ensure that these entities are engaging in legitimate economic activity and have economic substance in The Bahamas.
3 . What other laws/regulations in your jurisdiction touch on ESG themes?
The Prevention of Bribery Act of 1976 (amended in 2014) and the FTRA place attention on anti-corruption and anti-money laundering, respectively. While this legislation may not be specifically linked to ESG, the themes it touches upon fall within the “G” of ESG. Similarly, the Employment Act of 2001 (amended in 2017) inter alia protects employees and job applicants from discrimination “[…] on the basis of race, creed, sex, marital status, political opinion, age or HIV/Aids,” which falls within the “S” or Social theme of ESG.
There is no relationship between antitrust laws and sustainability issues. While The Bahamas has no general antitrust laws, there are three antitrust statutes that are industry-specific. The Communications Act and the Utilities Regulation and Competition Authority Act (both of 2009) together with the Electricity Act of 2015 regulate the electronic communications industry and electric industry, respectively, but do not make mention of sustainability issues.
4 . What, if any, litigation or enforcement activity has your jurisdiction seen related to ESG?
The Central Bank of The Bahamas is the ultimate enforcer against licensees and regulates all banks and trust companies operating within the jurisdiction. The Central Bank’s website provides that, “pursuant to [t]he Banks and Trust Companies Regulation Act,  and Central Bank Act,  the Central Bank of The Bahamas is responsible for the licensing, regulation and supervision of banks and trust companies operating in and from within The Bahamas. As such, all licensees are expected to adhere to the Central Bank's licensing and prudential requirements and ongoing supervisory programmes, including periodic onsite inspections, and required regulatory reporting.”
Similarly, the regulatory bodies previously mentioned, i.e., the Securities Commission, Compliance Commission, Insurance Commission, etc., would be the entities responsible for the enforcement of any irregularity or breach of regulation in their specific industry.
Additionally, the Financial Intelligence Unit, an agency established by the Financial Intelligence Unit Act of 2000, is an agency whose responsibility, as outlined by the Act, is to receive, analyse, obtain and disseminate information received in suspicious transaction reports that may relate to proceeds of crime relevant to the Proceeds of Crime Act, 2018 and/or the Anti-Terrorism Act, 2018. This agency works actively with the Royal Bahamas Police Force to investigate potential threats and to enforce any breach of the aforementioned legislation.
5 . What are the major non-law/regulatory drivers of ESG trends and developments in your jurisdiction?
Soft non-binding laws
The Bahamas generally supports and promotes soft non-binding laws. Since becoming a member of the International Labour Organization (ILO) in 1976, The Bahamas has ratified, inter alia, the organization’s convention on forced labour. Subsequently, in 2011, The Bahamas adopted the UN Guiding Principles of Business and Human Rights.
In 2014, a 25-year National Development Plan was developed, with the government claiming to have ensured that the UN’s 2030 Agenda and Sustainable Development Goals were considered during the plan’s development.
In response to the Organization for Economic Co-Operation and Development (OECD) Guidelines for Multinational Enterprises, The Bahamas passed the Multinational Entities Financial Reporting Act of 2018 (the MNE Act). The MNE Act was inspired by the Base Erosion and Profit Shifting (BEPS) initiative of the OECD. BEPS refers to strategies used by entities to avoid the payment of taxes that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations (www.oecd.org/tax/beps). The MNE Act requires entities with revenues of BSD 850 million or more to annually file a country-by-country report with the Minister of Finance.
In addition to the promotion of soft law, the government is also concerned with ESG in general. The government is motivated by operating in the best interest of the people and Bahamian resources. Companies are motivated by the desire to make profits and satisfy consumers. In a jurisdiction where consumers are not primarily interested in ESG-related issues, companies do not have to concern themselves with the promotion of ESG trends.
The general public. The general public’s concern for ESG-related matters is difficult to gauge due to a lack of data. Similarly, local companies are not particularly concerned with ESG. However, according to the Attorney General, foreign investors have taken an interest in ESG-investing in The Bahamas, specifically by purchasing blue carbon credits from the Bahamian government.
The public’s interest in ESG and investment attitudes is again difficult to gauge due to a lack of data. However, when looking at the findings discussed below, it can be assumed that the average retail investor is not greatly concerned with ESG-related matters.
Institutional investors. The Corporate Governance Survey 2022 of PwC Bahamas (the Survey) states that 56% of Bahamian board directors admitted that their board had no defined process of ESG oversight. Similarly, the Survey states that 50% of board directors indicated that they did not directly engage with shareholders. As it appears that shareholder opinions regarding ESG are not of high value to Bahamian boards, it cannot be said how much of a role, if any, shareholder activism plays in promoting ESG considerations. The Survey notes that the lack of contact with shareholders is uncommon in other jurisdictions, but ultimately concludes that ESG is not heavily considered in the governance of most boards in The Bahamas. The survey goes on to state that only 13% of board directors believed that ESG reports impacted shareholder investment decisions.
Companies. It has already been established that local companies are not concerned with a sustainable corporate agenda. Over 40% of local board directors admitted to not understanding material ESG risks nor ESG messaging.
Foreign companies looking to promote a sustainable corporate agenda see The Bahamas as an opportunity to appear sustainable without actually reducing their carbon footprints. The Bahamas is home to many mangrove ecosystems and is in possession of blue carbon credits that the government does not need due to the country being net negative in carbon emissions. Companies who are either unable or unwilling to reduce their carbon footprints have offered to purchase these blue carbon credits from the Bahamian government so that they are able to meet carbon emission requirements without having to actually reduce their carbon emissions.
The government. The government is proactive in the promotion and regulation of responsible business practices to a certain extent. The aforementioned Communications Act and Utilities Regulation and Competition Authority Act both forbid anti-competitive agreements, regulate mergers that can supress competition and prohibit companies from exploiting their dominance in the industry. Furthermore, the Utilities Regulation and Competition Authority Act established an authority of the same name, which ensures that all telecommunication and utility companies in The Bahamas are operating within the law.
Moreover, the Climate Change and Carbon Markets Initiatives Bill, 2022 and the Carbon Credit Trading Bill, 2022 are currently being pushed and, if passed, would regulate all carbon trade in the country and would require reports of carbon emissions. It is evident that some effort is being made in addressing ESG-related issues.
Greenwashing is a concern and is explicitly referenced by the Office of the Prime Minister. “A carbon credits system would help the planet…the project will be based on science and will not amount to ‘greenwashing’ or providing an escape clause for people to continue emitting greenhouse gases” (see www.tribune242.com/news/2022/apr/22/carbon-credit-buyers-have-approached-government). It is this fear of greenwashing that is motivating the government to put legislation in place that will regulate carbon trading before selling carbon credits to the first bidder.
6 . Are the laws, regulations and obligations highlighted in Question 2 primarily related to corporate disclosure?
The EPPA requires individuals and companies to disclose instances of spills or other accidental release of pollutants into the environment. Similarly, the Commercial Entities (Substance Requirements) Act, 2018 requires entities to disclose information regarding profit and expenditure and board directors to prove the legality of the entities’ economic presence in the jurisdiction. However, in neither case is a process prescribed to measure the output of what is being reported.
Currently, as ESG reporting is not mandatory in this jurisdiction, there are no set regulations for when reports are to be updated. For the companies that do participate in ESG reports, it can be assumed that the findings are reported to their shareholders in some kind of periodic communication.
The only known firm that conducts ESG reporting in this jurisdiction (Deloitte) has expressed its support of the International Sustainability Standards Board (ISSB). In their 2021 Financial Brief, Deloitte said that “ISSB will take account of and build on the substantial work done by many leading global organisations in the area of sustainability and the underlying environmental, social and governance (ESG) factors over recent years.”
7 . Which sectors are most impacted by ESG in your jurisdiction? How significant is ESG investment in your jurisdiction?
ESG is still too new in this jurisdiction to determine what sectors are most impacted by ESG, as a few industry leaders are just now starting to consider ESG collectively. While Environmental and Governance have been the focus for legislators, we do know that the consideration for ESG is growing.
The parent company of one of the largest electronic communication companies in The Bahamas is Liberty Latin America (LLA). In July 2022, LLA released its second annual ESG report “outlining the company’s commitment to environmental, social, and governance (‘ESG’) practices across its operations in Latin America and the Caribbean” (see ewnews.com/btcs-parent-company-lla-releases-2021-esg-report). In the news article, LLA’s CEO, Balan Nai, stated that the 2021 ESG report shows that the company is committed to “responsible and sustainable practices across our operations in Latin America and the Caribbean.”
8 . What are the trends in your jurisdiction regarding ESG governance?
The title of “Chief of Sustainability” is not becoming a common trend, though comparable titles are seen across various fields in the jurisdiction. The University of The Bahamas has a Sustainability Committee headed by a Sustainability Coordinator, Bahamar (a major hotel brand) has a Sustainable Director and the government has recently appointed a new Director of Environmental Planning and Development. Similarly, specialized ESG committees are now being created by executive boards.
Beyond this, there appears to be a growing interest in the social aspect of ESG on Bahamian boards, with over 80% of respondents to the Survey stating that they had invested, or plan to invest, in up-skilling of their employees. Further, over 30% of respondents answered that they believed that there should be more conversations about diversity and inclusion at the board level. Moreover, 50% of respondents believe that their companies should have a wider social purpose, nearly 40% believe that their companies should be doing more to promote diversity in the workplace and 69% have stated that ESG-reporting and disclosure should be a priority for management. While these findings display at the very least some interest in ESG, they are mostly just beliefs that some changes should be made and do little to prove any actual change.
The most notable trend would be legislation relating to ESG. Most of the legislation referenced in Question 2 has either come into effect or been amended within the last four years.
9 . To what extent are ESG ratings or ESG benchmarks relied upon in your jurisdiction?
ESG rating agencies
Deloitte provides ESG rating services, but it is not known how often those are utilized. It can be assumed that ESG ratings are not often used, given the lack of attention to ESG by board directors and the opinion of directors that investors do not care much about ESG ratings.
10 . What is the role of the private markets versus public markets in driving ESG developments in your jurisdiction?
The Survey states that ESG is not currently prioritized by many boards when forming business strategies, citing a lack of awareness as a contributing factor. Despite this, issues relating to ESG, such as income inequality and human rights, are heavily considered when developing strategy, with both being in the top percentile of issues considered. Climate change and social movements are also considered but on a smaller scale.
Pursuant to the Survey 2022 of PwC Bahamas, over 40% of Bahamian board directors admitted to not understanding the material risks of ESG. Further, 38% admitted that ESG issues were not linked to their company’s strategy.
Government-owned organizations have given more attention to ESG considerations in recent years, although it would be inaccurate to refer to ESG considerations as “key” to these organizations.
The ESG agenda is mainly being pushed by international organizations of which The Bahamas is a part, namely the UN and ILO. The local government has become more concerned with matters pertaining to ESG, but as mentioned from the beginning, the focus is on Environmental and Governance, and not much emphasis is being placed on the Social aspect.
11 . What are the major challenges in terms of compliance for companies under ESG obligations?
The main barrier to effectiveness is a lack of action being taken. Throughout this chapter, there have been several references to the Survey, which states that a large portion of respondents believe that ESG should become more of a priority, and that more should be done to push an ESG agenda both inside and outside of the workplace. Yet only 25% of Bahamian board directors report that ESG issues are regularly a part of their agendas. This small percentage reflects how little action is being taken by companies to prioritize the ideas that they claim should be prioritized. Moreover, only 6% of respondents believe that their boards understand ESG risks well. Such a small figure is concerning when contrasted with the number of respondents who claim to want to make ESG a priority. This reveals another barrier to effectiveness, namely a general lack of knowledge surrounding ESG in The Bahamas. The fact that participation in ESG reporting is not mandatory in this jurisdiction contributes to the lack of priority and to unawareness that inhibits effectiveness. As only 13% of respondents felt that ESG reporting was too expensive, high costs are not much of a barrier. There is no available data to suggest that public opinion is a factor in ESG’s lack of effectiveness in this jurisdiction.
12 . What information sources are most relevant for ESG considerations in your jurisdiction?
The most relevant sources for ESG considerations would be reports required under different legislation and the occasional corporate survey. However, given that there is already a focus on “Environmental” and “Governmental,” it may be prudent to consider the mission of certain NGOs, particularly in this jurisdiction, where there is less legislative development with regards to “Social.”
The Organization for Responsible Governance (ORG) is an NGO that has three main focuses: Accountable Governance; Education Reform; and Economic Development. ORG “serves as a bridge uniting stakeholders from a diverse cross-section of society in pursuit of a common vision: a thriving Bahamas where accountable and transparent governance allows each individual, business and group a say in decisions that affect our future and equal access to opportunity” (see www.orgbahamas.com). ORG works with like-minded partners to fuel civil society groups around issues of mutual interest, fosters collective action and encourages capacity-building and development in advocacy groups.
The Nassau Institute is a think tank that should also be approached as an information source for ESG consideration. The Nassau Institute’s “mission is to formulate and promote public policies for The Bahamas based on the principles of limited government, individual freedom, and the rule of law” (see www.nassauinstitute.org/about-the-nassau-institute). Both ORG and The Nassau Institute can provide valuable insight to social factors that need to be addressed in ESG considerations.
13 . Has your jurisdiction developed a Taxonomy related to ESG?
There is no Taxonomy related to ESG in this jurisdiction.
14 . What does the future hold for ESG in your jurisdiction?
With the increased awareness of ESG in The Bahamas and the legislative initiatives taken by the government thus far, this jurisdiction will most likely see various developments over the next few months and years to come.
In the short term, we will probably see an increase of ESG role designations in entities and organizations and more education forums for the public at large and private entities.
In the medium term, we will most likely see more ESG-focused legislation considered by the government, particularly on the “Social” aspect, which is lacking, and perhaps there will be more of a push for more legislation for this area. We should also expect an increase in surveys to determine the public and commercial view of ESG.
In the long term, The Bahamas may pass more ESG-friendly legislation that is conducive to development and business opportunities. We will most likely see an increase in rating exercises and surveys and an influx of investors and developers canvassing or entering the jurisdiction for opportunities. Likewise, this jurisdiction saw huge developments and the migration of key industry players in the digital asset space when modern and advanced legislation was created. The Bahamas recently passed the Digital Assets and Registered Exchanges Act, 2020 (amended in 2022) (DARE Act). This Act, inter alia, regulates the issuance, sale and trade of digital assets in or from within the jurisdictions. The DARE Act is innovative and was one of the first of its kind in the region. Since its commencement, we have seen an immense interest by entities wanting do business in The Bahamas.
The Bahamas has witnessed and proven that where there is legislation to facilitate the ease of doing business, industry opportunities and development will follow. The Bahamas is keen to introduce legislation that is well positioned with the highest international practices and standards. ESG efforts are no exception, and we already see the shift happening.