Dubai Financial Market (DFM) on Wednesday announced the launch first-of-its-kind Environment, Social and Governance (ESG) Index with the objective of improve UAE market’s competitiveness and attracting more investment.
It also hopes to encourage listed companies in the UAE to enhance their ESG best practices, according to a press release issued by DFM.
According to Essa Kazim, Chairman of the DFM, “The appropriate implementation of best practices of corporate governance, disclosure and transparency as well as environmental and social commitment is essential to boost UAE markets’ competitiveness, attract further investments and sustain growth noting that investment institutions across the world are increasingly factoring these matters in investment decisions process.”
The new index – S&P/Hawkamah UAE ESG Index – is the result of cooperation with S&P Dow Jones Indices and the Hawkamah Institute for Corporate Governance in the UAE (Hawkamah)
Supported and approved by the UAE Securities and Commodities Authority (SCA) the inaugural index consists of 20 listed companies and provides 5 years backtracking, enabling market participants to access index performance since 2015.
The index sample will be reconstituted, using data collected by Hawkamah, once a year in November and the top 20 stocks are automatically added to the index.
The DFM statement confirmed that all companies in the selection process will be subject to an assessment process, which “incorporates ESG criteria against which the company’s disclosure practices are evaluated; the Transparency & Disclosure methodology.”
According to the DFM statement, “There are two categories, one focusing on environment & social indicators and the other focusing on corporate governance indicators. The evaluation process seeks information relating to companies’ disclosure of the ESG indicators available in the public domain, such as a company’s annual report, Web site, press releases, and/or the disclosures made on stock exchanges. The final aim is to determine whether a company has made transparent disclosures in such documents on any of the indicators that are part of the ESG assessment system.
