ESG Index

In 2011, Hawkamah launched the first ever Middle East and North Africa (MENA) Environment, Social and Governance (ESG) Index in cooperation with S&P Dow Jones Indices with the support of the International Finance Corporation (IFC). The S&P/Hawkamah ESG Pan Arab Index measures the performance of 50 of the best performing stocks in the MENA region as measured by environmental, social and governance factors.

The rising prominence of ESG issues and growing regulatory demands are reshaping requirements for disclosure and analytics. For example, stakeholders require more information about a company’s ESG track record, while companies are looking to explore their strengths and weaknesses in this realm. A global transition is now underway to finance a more resilient, sustainable global economy, which may bring with it significant growth opportunities. A growing body of evidence also indicates that a company’s dedication to ESG could be an important factor in risk management and returns.

More investors around the world are taking an interest in the opportunities, risks related to ESG.

In response to changing economic conditions and to the practices that played a role in sparking the 2008 financial crisis, and growing regulatory demands globally, institutional investors are increasingly focusing on long-term risks in their investments, and environmental, social and governance factors play a significant role in making those assessments. Financial performance indicators have traditionally marked whether or not to invest in a company. Non-financial indicators, however, may also be indicative of the future performance of companies.

The S&P/Hawkamah ESG Pan Arab Index measures listed companies in emerging markets that pursue sustainable business practices. The purpose of the ESG Index is to identify those companies that perform well along the three parameters of environmental, social and corporate governance practices when compared to their market peers.

The Index covers companies in Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Qatar, Bahrain, Oman, Jordan, Egypt, Lebanon, Morocco and Tunisia, and provides qualitative information to investors looking to analyze these companies' sustainability performance. Index constituents are derived from listed companies and selected by total market capitalization. This universe of stocks is then subjected to a screening process which yields a score based on a company's ESG disclosure practices in the public domain. Examples of disclosure channels in the public domain include annual reports, websites, bulletins, and disclosures made on stock exchanges.  For more information on the methodology, please see the link below.

Not only does the presence of this ESG index highlight environmentally sustainable, socially responsible businesses in the MENA region, but by potentially attracting long-term international institutional investors looking for exposure to socially responsible companies in emerging markets, the index may help reduce regional stock market volatility.

In addition to this index, in April 2020, S&P Dow Jones Indices and Hawkamah launched the S&P/Hawkamah ESG UAE Index. The S&P/Hawkamah ESG UAE index is designed to reflect the performance of 20 of the best-performing stocks in the UAE as measured by ESG factors. It uses the same process as the Pan Arab index but focuses on companies within the UAE.

For more information, please contact info@hawkamah.org

• Link to Index Methodology and most recent factsheet: https://www.spglobal.com/spdji/en/indices/esg/sp-hawkamah-esg-pan-arab-index/#overview

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