S&P, Hawkamah launch environmental corporate governance and sustainability indices for MENA markets

The S&P-Hawkamah ESG MENA indices are expected to include stocks from 11 markets initially and will raise the profile of local companies that perform well along the three parameters of environmental, social and corporate governance responsibility when compared to their peers.

The development of the indices will be modelled on the S&P ESG India index, a project originated last year by Standard & Poor's, CRISIL and KLD Research and Analytics, with partial financial support of the International Finance Corporation (IFC), a member of the World Bank Group.

The joint project will be presented by Standard & Poor's and Hawkamah this afternoon at a DIFC Workshop in Dubai.

The S&P-Hawkamah ESG MENA indices will focus on the best performing stocks as measured by their high level of concern for the interests of both internal and external stakeholders - shareholders, employees, customers, the larger community within which they operate and, most importantly, the environment, a legacy for future generations. The indices will employ a unique and innovative methodology that quantifies a company's ESG practices and translates them into a scoring system which is then used to rank each company against their peers in the MENA markets.

"Advancing corporate governance and sustainability parameters in the region requires a multi-faceted approach where we recognise that each of the MENA countries has reached variable phases. We will be consulting and cooperating with all relevant authorities in undertaking this work. Our aim is to raise the bar for corporate performance on major issues for the region including the environment, social and corporate governance responsibility," said Dr Nasser Saidi, Executive Director, of Hawkamah.

"Hawkamah has proactively initiated programs for critical market sectors that reinforce corporate governance practices across the region and aim to align it with international best practices. Hawkamah contributes its understanding of the MENA business and regulatory context, which when coupled with Standard & Poor's experience in ESG metrics and indices will form a reference point for investors, regulators and the private sector on corporate governance reform in the Gulf and strengthen investor confidence," Dr Saidi concluded.

"The S&P ESG methodology is unique in that it uses the scores that companies received on ESG parameters as index constituent weights," said Robert Shakotko, Managing Director Index Services, Standard & Poor's. "This ensures index performance is based on a company's investment in ESG parameters rather than its sheer market size. In this new project for the MENA markets, we will tailor our approach far more precisely to the prevailing disclosure and reporting standards in each local market through Hawkamah's expertise."

As a pioneering effort, S&P ESG indices represent the first of their kind in the MENA region, employing a unique and innovative methodology that quantifies a company's ESG practices and translates them into a scoring system which is then used to rank each company against their peers. This will provide investors with objective insight to incorporate sustainability measures into their investment decisions.

A joint Standard & Poor's / Hawkamah task force will be formed to develop the framework for the S&P ESG MENA Indices expected over the next 12 months.