Moving forward on ESG: Saudi Arabian Stock Exchange strengthens sustainability commitments

As ESG is rapidly gaining prominence in the global financial community, the Saudi Stock Exchange – one of the largest stock exchanges in the world with a total market capitalization of over $2.5 trillion – continues its efforts to promote ESG. importance of ESG and achieve long-term sustainable growth in Saudi Arabia and the wider region. With sustainability being a fundamental part of Saudi Arabia’s Vision 2030 initiative, the Exchange prominently supports the integration of ESG across its operations and encourages stronger ESG disclosure in its ecosystem.

“ESG, as a concept, is relatively new to the Middle East, but it is critically important to Saudi ambition and something we have embraced, as it is central to our efforts to develop a more sustainable economic landscape which we believe can drive long-term economic growth for our listed companies,” said Mohammed Al-Rumaih, CEO of the Saudi Exchange.

Capitalize on the benefits of ESG and sustainability

“We are at the start of what we expect to be a long period of growth for ESG investing, and we see it as our responsibility to enable our listed companies to capitalize on this significant opportunity,” he said. he declares.

Furthermore, Al-Rumaih points out that adopting ESG will improve returns on investments by enabling better allocation of capital.

“Focusing more on sustainability allows businesses to reduce costs by reducing energy consumption and reducing waste,” says Al-Rumaih.

Beyond the appeal to investors, Al-Rumaih notes that there are myriad reasons why adopting ESG is a business imperative for all companies.

“Customers and employees are looking for companies that represent more than their bottom line. Companies that embrace ESG will attract a wider customer base and have an advantage in their ability to attract, motivate and retain talent,” he said.

Alignment with Vision 2030

The Kingdom’s Financial Sector Development Program (FSDP) is central to achieving the goals of Saudi Arabia’s Vision 2030, which aims to develop a diversified financial sector and ensure that Saudi Arabia builds a financial market. advanced capital. Advancing ESG issues is central to this mission to diversify the economy and create a sustainable financial sector, says Al-Rumaih.

“Sustainability is at the heart of everything the Kingdom does in pursuit of Vision 2030,” he says, noting that major programs such as the Saudi Green Initiative and the Middle East Green Initiative (both launched in October) show the Kingdom’s commitment to achieving net zero carbon emissions by 2060.

“As part of Vision 2030, Saudi Arabia aims to become a truly global nation with a financial ecosystem that connects opportunities in the Middle East to businesses and investors in the rest of the world. Our commitment to ESG is key to achieving these goals. The Saudi Stock Exchange has a central role to play in encouraging sustainable financial growth,” Al-Rumaih said.

Publication of new ESG disclosure guidelines

In October 2021, the Saudi Stock Exchange issued ESG disclosure guidelines for its more than 200 listed companies and others seeking to be listed on the stock exchange. Developed under the guidelines of the UN Sustainable Stock Exchange (SSE) model (the Saudi Exchange became an official SSE partner in 2018), the new guidelines introduced reporting standards and options for companies of all sizes, enabling them significantly improve quality and transparency. their reporting or begin the practice of reporting, if they have not already done so.

“When our exchange began our ESG journey in 2018, we found that while some of our listed companies were already at advanced stages of disclosure and reporting, the majority were unfamiliar with ESG reporting best practices. “, says Al-Rumaih. “Of course, this is a global issue, as companies around the world follow different methodologies and standards.”

The ESG guidelines issued by the exchange facilitate this challenge for Saudi companies, he notes. In addition, higher quality ESG reports allow business leaders and investors to more accurately assess a company’s true sustainability progress relative to its competitors. It also enables executives to identify targeted ways to improve a company’s ESG profile while helping investors spot new opportunities, as ESG information often provides key insights into a company’s management capabilities and priorities. ‘a company.

ESG awareness

“We want the new ESG disclosure guidelines to act as a catalyst to support sustainable and inclusive business practices in the Saudi capital market,” says Al-Rumaih. Since the guidelines were released, they have served as a powerful vehicle for raising awareness of the importance of ESG among companies in the region, he notes, prompting them to review and improve their sustainability initiatives and their ESG reporting efforts. “The guidelines will encourage companies to voluntarily disclose their ESG performance while providing structure and support on their ESG journey going forward,” Al-Rumaih said.

And, as the guidelines will be continuously updated to reflect the evolving ESG landscape, they will remain a relevant tool for the Saudi Stock Exchange in its ongoing efforts to help companies achieve sustainable business growth, he adds. .

Beyond the publication of the guidelines, the Saudi Stock Exchange has put in place additional measures to promote the implementation of ESG. In February 2022, the Exchange launched a series of ESG awareness webinars to broaden understanding among listed companies of the importance and benefits of implementing ESG from the perspective of many stakeholders. different.

Importantly, Al-Rumaih notes, the Saudi Stock Exchange plays an active role in helping companies achieve their sustainability goals by directly advising their executives on specific ways to improve both their ESG reporting and overall ESG profile by implementing best practices in their operations. For example, the Exchange organized a training session on the fundamentals of ESG disclosure and best practices for issuers to guide them in implementing ESG within their organizations.

The Saudi Exchange recognizes the importance of its role as a key driver of sustainability and ESG in Saudi Arabia. The Exchange has actively engaged stakeholders such as government entities, universities, investors and issuers to advance Saudi Arabia’s sustainable development efforts.

Lead by example

Along with its efforts to guide companies through their ESG journey, the Saudi Stock Exchange has undergone several internal changes to advance its own progress and continues to strive to improve its internal ESG best practices.

“ESG is more important than ever to us, and we currently have more than 15 initiatives centered on a few key themes – including economy, environment, education and community – that drive our ESG efforts,” says Al-Rumaih, noting that Saudi Arabia’s Public Investment Fund (PIF), a major shareholder in Saudi Tadawul Group, recently pledged $400 billion in global ESG investments.

Creating a more diverse workforce is an ESG priority for the Saudi Stock Exchange, says Al-Rumaih. “The Exchange was the first company in Saudi Arabia to sign the UN Women’s Empowerment Principles in 2019,” it adds.

The future of ESG in the Saudi capital market

Recent initiatives by the Saudi Stock Exchange – including the launch of voluntary ESG disclosure guidelines and helping companies in the Kingdom of Saudi Arabia to integrate high-quality ESG reporting and best practices into their operations – are key steps to ensure that the Saudi capital market becomes a major destination for investors. And, just as important, they encourage investors to unlock the many new opportunities created by ESG in the region and beyond.

Learn more about the Saudi Stock Exchange’s commitment to advancing ESG.

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