The model guidance on reporting ESG information to investors raises the standard of governance, by putting into operation sustainability standards and integrating them into both ADX strategy and listed companies alike. The newly-released standards, which are more comprehensive than many other exchanges has issued, will enhance ADX’s competitiveness and attract more responsible investments to the Emirate in line with the recommendations of the United Nations Sustainable Stock Exchanges Initiative (SSE), the World Federation of Exchanges (WFE), the Global Reporting Initiative (GRI) and the International Integrated Reporting Framework.
ESG guided principles will also ensure ADX continues to make essential contributions towards promoting sustainability in financial markets, in alignment with the UAE National Vision 2021 and Abu Dhabi Economic Vision 2030, which both outline approaches to develop appropriate infrastructure while preserving s a based on a sustainable and knowledge-based economy. Companies’ application to the standards of this guide opens the way for investments supported by USD 83 trillion in asset allocation from various Asset Management Funds (AMC) directed to companies that apply environmental, social and corporate governance standards.
The launch of the guide is a continuation of the Exchange’s strategy aimed at supporting the national economy. This is achieved by providing a sustainable trading environment, launching initiatives that encourage the business community to adopt environmental and societal sustainability practices. The standards of governance will be raised by enforcing sustainability standards and integrating them into both ADX strategy and listed companies. Especially those related to governance, environmental and community practices, which will further enhance the Exchange’s competitiveness and attract more responsible investments to the emirate.
The importance of these reports is also evidenced by the investor’s interest in sustainability as investors and agencies perform a rating analysis of the environmental, social and governance disclosure performance of the listed company. Such examinations are based on publicly available data to inform those involved in their investment decision-making process whether the company reports on sustainability information. The investment community often interprets the lack of disclosure of key sustainability indicators as a signal that the company may not be able to mitigate the risks of sustainability or seize opportunities. It also highlights its importance in terms of enhancing the competitiveness of companies by understanding the needs of stakeholders in the company to boost market competitiveness, and guide cost reduction by measuring issues such as energy and water consumption and resource and waste use and control.
According to this voluntary guide, which ADX reserves the right to update and/or amend, companies must disclose critical environmental, sustainability and governance issues. These key core issues can be identified in four phases in accordance with the Global Reporting Initiative (GRI). The first step involves identification. At this stage, the Company identifies all issues related to sustainability that may have potential impacts on the Company’s activities, products, services and relationships occurring within or outside the Company. The next stage is the identification of priorities. At this stage, companies choose the most important topics to report in accordance with the principles of relative importance and stakeholder inclusion. This phase is followed by validation. These steps include assessing the material aspects against the scope of the reports, the limits of each impact, and the reporting period. The review represents the final stage of the identification process. The review follows the publication of the company report to prepare for the next report cycle.
According to the ADX initiative, listed companies are required to submit an independent report on sustainability, as these reports are in line with the GRI standards. Sustainability reports provide the company’s environmental, social and corporate disclosure content in one place and address environmental and social information needs and governance related to investors and other stakeholders, such as consumers and civil society.
The criteria on which these reports are based are divided into three sets of 31 basic indicators for environmental and social disclosure and corporate governance. ADX will soon hold workshops for all listed companies to clarify these criteria and to explain how to report and respond to queries from companies. Companies listed on the Exchnge are expected to release these reports by the end of 2019.
H.E. Khlalifa Salem Al Mansouri, Acting Chief Executive of ADX said: “ADX has made a formal commitment to drive sustainability in financial markets by becoming a partner exchange of this United Nations led ‘The Sustainable Stock Exchanges’ initiative (SSE). We have carried out this programme to support our listed issuers in their sustainability reporting journey. The ESG Disclosure Guidance represents a natural evolution of our status as a regional-leading exchange, stemming from ADX’s status as a member of the Sustainability Group in the World Federation of Exchanges (WFE).”
ADX’s plan also makes essential contributions towards the UN Sustainable Development Goals (SDGs), and the delivery of many of these targets have been enshrined in decree by the UAE cabinet through the UAE National Committee on SDGs. This sees a number of Federal level government organizations responsible for the national implementation for SDGs, towards which the new ESG disclosure guidance will make an essential contribution.