In the region, particularly the GCC countries, capital markets have grown exponentially with surge in IPO's and listings. While most of the capital markets in the region are new and are just in the process of developing strong capital market regulatory regimes, developing sound corporate governance frameworks in listing requirements is key to the growth of the region's capital markets.

One of Hawkamah's aims is to improve the corporate governance practices of listed firms. In doing so, the institute conducts firm level corporate governance assessment, which looks at operations of boards throughout the MENA region, the organizational structures of management or the supervision of management, in particular the audit committee, the adequacy of accounting standards and practices, the quality of financial information and communication, the effectiveness of internal and external controls (by auditors and regulators), relations between companies and the various categories of shareholders, and the role and independence of various other market players, such as banks, financial, analysts, and rating agencies.

Read more about the Governance in Equity Markets assessment program.

Read more about the Board Development Program.

Read more about Hawkamah's Corporate Governance Assessment Program.

TNI: BASICS

IFC: Survey

ESG Index

Hawkamah is developing the first ever Environment, Social and Governance (ESG) Index in the MENA region in cooperation with Standard & Poors with the support of the International Finance Corporation (IFC).

In response to changing economic conditions and to the practices that played a role in sparking the current financial crisis, institutional investors are increasingly focusing on long-term risks in their investments, and environmental, social and governance factors play a significant role in making those assessments. Financial performance indicators have traditionally marked whether or not to invest in a company. Non-financial indicators, however, are also indicative of the future performance of companies.

The ESG Index will provide an incentive to listed companies in these emerging markets to pursue sustainable business practices through improved environmental and socially responsible operations, as well as enhanced corporate governance systems. The purpose of the ESG Index is to raise the profile of those companies that perform well along the three parameters of environmental, social and corporate governance practices when compared to their market peers. The methodology is based on the one developed for the S&P ESG India index, which has outperformed its benchmark peers.

The Index will cover Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain, Oman, Jordan, Egypt, Lebanon, Morocco and Tunisia, and will provide qualitative information to investors looking to analyse these companies' sustainability performance. Index constituents are to be derived from over 1,000 listed companies and selected by total market capitalization. This universe of stocks is then subjected to a screening process which yields a score based on a company's ESG disclosure practices in the public domain. Examples of disclosure channels in the public domain include annual reports, websites, bulletins, and disclosures made on stock exchanges.

Not only will the project strengthen and promote the success of environmentally sustainable, socially responsible businesses in the MENA region, but by attracting long-term international institutional investors looking for exposure to socially responsible companies in emerging markets, the index will help reduce regional stock market volatility.

The survey

To complement the ESG analysis, Hawkamah has sent a survey to the listed companies potentially included the index. The purpose of this survey is to assess to what extent the companies of the MENA region are ready to meet the changing demands of long-term investors as well as other stakeholders, and benchmark these practices across the MENA. We greatly appreciate the respondents' assistance in this initiative and they will be invited to the formal launch of the Index.

For more information, please contact info@hawkamah.org