The Mena wide environment, social and governance (ESG) index developed by Hawkamah in co-operation with Standard & Poor’s, underwent its first rebalancing in December last year.

The index, developed with the support of the International Finance Corporation (IFC), includes the top 50 companies in the Mena region based on their performance on nearly 200 ESG metrics, when compared to their regional peers.

The rebalancing revealed that financial stocks continue to dominate the index making up 45.67 per cent, said a Hawkamah official.

However, this is indicative of the region’s equity market, as financials, likewise, represent nearly half of the benchmark S&P Pan Arab Composite.

Saudi Arabia (28.49 per cent), Qatar (22.87 per cent) and UAE (22.77 per cent) were the top three largest countries in the index.

The top 10 stocks by weight in the index are UAE telecom operator du, DP World, Savola Group, Arab Bank, MobiNil, National Bank of Abu Dhabi, Orascom Construction Industries, Qatar Telecom, Maroc Telecom and Al Khaliji Commercial Bank.

Dr Nasser Saidi, executive director of Hawkamah, said: 'For the past two years Hawkamah has been assessing and monitoring the growing interest of businesses, government, policy makers and investors in environment for social responsibility and corporate governance in the Arab region.'

'Recent political developments have heightened the focus on governance, accountability, transparency and disclosure. The data shows that there have been overall improvements in the ESG scores of regional companies,' Dr Saidi remarked.

This, he said, was partly due to the increasing emphasis the region’s regulators have placed on corporate governance.

'The recent issuances of corporate governance codes in the UAE and Qatar, for example, have had a positive effect on the rankings of their companies.  But companies themselves have started to see the value of better disclosure and many have gone beyond the minimum requirements,' he added.

Kirsty Knight, director of Index Operations at S&P Indices, said following the rebalance, the index, which is unique in being weighted by ESG scores, is dominated by financial stocks, with this sector comprising 45 per cent of the index.

'Telecommunications Services is the next largest sector with 18 per cent. This sector also contributes the index’s largest constituent, Dubai listed Emirates Integrated Telecommunications Company.'

'The largest country is Saudi Arabia, which contributes 15 constituents to the 50 stock index.”
 
Selcuk Tanatar, manager, Sustainable Business Advisory, Mena, (IFC) said: 'Incorporating ESG analysis into the investment process helps reduce risks and improves long term financial returns.'

'Building on the successful introduction of ESG index in Mena, IFC is committed to expanding its collaboration with the private sector to increase their level of sustainability focused investment and introducing appropriate standards to encourage participation of all stakeholders,' he added.-TradeArabia News Service