The first environmental, social and governance (ESG) index of Middle Eastern and North African companies is due to be launched later this year - two years after it was first announced. The Dubai-based Hawkamah Institute for Corporate Governance, index and ratings provider Standard & Poor's (S&P), and Credit Rating and Information Services of India Ltd. (Crisil) are developing the index, which will be based on constituents' ESG performance, Environmental Finance Publications reported Friday. “The index will help some 400 listed companies in 11 countries better understand environmentally and socially responsible investment practices, and the importance of implementing sound corporate governance,” International Finance Corporation (IFC) said, the private sector arm of the World Bank, which is supporting the index's development. The index, expected to comprise up to 60 stocks, will be composed from this 400-strong universe, scored by ESG performance and screened for transparency and disclosure, and based on companies' responses to a survey. Alka Banerjee, vice-president of global equities index services at S&P in New York, said that the long lead time is a function of the difficulty in sourcing ESG information on companies in the region. The index is based on a similar methodology S&P and Crisil developed for an Indian ESG index, the research for which “took a whole year - with 11 countries, it's very challenging”. “The index composition process is underway, with plans to start back-testing to ensure necessary rigor and demonstrable performance,” said Mary Porter Peschka, principal operations officer at IFC Advisory Services, Middle East and North Africa. “In parallel, investor consultations at the institutional and retail levels in different parts of the region will be undertaken. These activities are expected to be completed and the index launched by the third quarter.” She added: “We hope that investment products linked to the ESG index are developed once the index has been launched. Efforts will be made to reach out to investors during the index composition process and subsequent to the commercial availability of the index product.” The countries from which constituents will be selected are: the United Arab Emirates, Saudi Arabia, Qatar, Bahrain, Oman, Kuwait, Jordan, Egypt, Lebanon, Morocco and Tunisia.
