Top environmental, social, and governance (ESG) concerns in the GCC include global warming/energy, going paperless/data security, talent/equality, ethics, and digitization.
Insurance firms have an excellent opportunity to excel in Environmental, Social, and Governance performance, as the financial sector is the top contributor to the list.
It’s all optional
Requirements for environmental, social, and governance factors are still being developed in the GCC region, where their adoption is mainly voluntary.
Telecom & Logistics (20 percent), Industrials (10 percent), Real Estate (10 percent), and Financials (30 percent) are all well-represented among ESG’s top performers, demonstrating that companies in any country or industry can excel in this area.
However, regional insurers are developing ESG practices and increase in maturity in ESG reporting, with crucial best practices emerging, according to a report published by Arthur D. Little.
Nevertheless, only half of the significant insurers in the region are disclosing ESG information.
Other major regional public-private organizations are also developing frameworks for participation in ESG finance. For example, with over 40 shopping centers and other developments, Majid Al Futtaim is a leading retail conglomerate in the MENA region. It is implementing a Green Finance Framework to support its ESG activity.
The Public Investment Fund (PIF) of Saudi Arabia, a US$ 430 bn sovereign wealth fund involved in KSA’s transformation, collaborated with BlackRock on ESG finance.
Next, HSBC and Saudi National Bank (SNB) established the first-ever sustainable finance framework, elevating SNB to the position of the most extensive banking group in the Kingdom.
Since sustainability has been a central tenet of the Red Sea Development Company’s regenerative tourism project, the company has been recognized as a global ESG leader in the Real Estate sector.
ESG rating systems
There are currently three ESG rating systems referred to by the Arab Federation of Exchanges that cover companies in the region, with the Refinitiv ESG Score being the most recommended due to its widespread adoption and direct measurement of company ESG performance (vs. risk), offering a 97 percent share of MENA sustainability leaders’ score out of 100.
Refinitiv ranks ESG performance, commitment, and effectiveness across ten main themes accounting for industry and company size biases.
MSCI has developed an ESG index that measures a company’s preparedness for ESG risks, and S&P, one of the world’s largest rating agencies, has recently expanded into the ESG rating segment by combining the ESG profile of a company with the company’s readiness to cope with ESG topics.