DFM Launches The First Of Its Kind ESG Index Aiming To Strengthen UAE Markets’ Competitiveness And Attract Investments

The new index consists of 20 companies and aims to encourage listed companies in the UAE to expand embracing ESG best practices

Dubai Financial Market (DFM) today launched the UAE Index for Environment, Social and Governance (ESG), as the first index of its kind from the financial markets in the UAE and the region, aiming to measure listed companies embracing ESG best practices. The S&P/Hawkamah UAE ESG Index is developed in cooperation with S&P Dow Jones Indices, the world's largest, global resource for index-based concepts, data and research, as well as the Hawkamah Institute for Corporate Governance in the UAE (Hawkamah), DFM’s strategic partner in the field of promoting best practices of corporate governance amongst listed companies.

This index is supported by the UAE Securities and Commodities Authority (SCA), as His Excellency Sultan Bin Saeed Almansoori, Minister of Economy and Chairman of the SCA has approved DFM’s initiative to launch the index, as part of both sides commitment to realize leadership’s vision on boosting UAE financial markets’ competitiveness and attract further investments.

H.E. Eng. Sultan bin Saeed Al Mansoori, Minister of Economy and Chairman of the Securities and Commodities Authority (SCA), said that the launch of the index complements and supports SCA’s efforts in developing the supervisory regime to bring it in line with the best international standards and practices, thus promoting the culture of governance and enhancing the confidence of investors in the UAE capital market, especially after the adoption of a guide to the governance of public joint-stock companies early 2020, which regulates corporate governance and social and environmental responsibility requirements.

Commenting on this significant step, H.E. Essa Kazim, Chairman of the DFM said, “In line with DFM’s Sustainability Strategy 2025, we are delighted to launch the first index of its kind from a financial market in the UAE and the region in cooperation with S&P Dow Jones Indices and Hawkamah, as part of our joint efforts to further develop the capital markets’ sector. The index provides a trusted and transparent tool that measures listed companies’ commitment to ESG. 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.”

For his part, Dr. Obaid Al Zaabi, SCA’s CEO, stressed that beside being an important measuring tool, the new index will help to raise awareness about the importance of putting into practice the governance principles outlined in the new guide to the governance of public joint-stock companies. It will also help to promote the spirit of competitiveness and the compliance of the boards of listed companies with the implementation of the principles, in addition to developing benchmark indicators to evaluate the performance of these companies when it comes to their compliance with the social and environmental responsibility principles. 

From his side, Dr. Ahmad Al Shaikh, Chairman of Hawkamah, said “there is no better time to encourage corporate responsible behaviors than now, the new ESG index will create good competition between listed companies to do the right thing, paying more attention to the environment, social and governance elements when managing their business”.

The S&P/Hawkamah UAE ESG inaugural index sample is consisted of 20 listed companies. It provides 5 years back tracking enabling market participants to access index performance since 2015. The Index is accessible through DFM’s website as well as any other data dissemination platforms.

“S&P Dow Jones Indices aims to develop and offer innovative ESG indices, research and data that enable global market participants to meet both their investment and sustainability goals.  We’re excited to launch this new index in the UAE as more investors look to incorporate ESG best practices in their investment decisions. S&P DJI has been a pioneer in ESG indexing for more than two decades and we look forward to working with our partners and clients in the Middle East and globally to bring ESG into the core of investors’ portfolios,” said Reid Steadman, Global Head of ESG Indices at S&P Dow Jones Indices.

It is noteworthy that the Index sample is reconstituted once a year in November and the top 20 stocks are automatically added to the index. The reconstitution process uses data gathered by Hawkamah, S&P’s ESG screening partner in the Middle East. All companies in the selection universe are subjected to an assessment process which incorporates ESG criteria against which the company’s disclosure practices are evaluated; the Transparency & Disclosure methodology. 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.

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