Saudi Arabia issues ESG disclosure guidelines for listed companies

The move is expected to encourage firms to voluntarily disclose their ESG practices and raise awareness about sustainability

ESG investments have gained traction after the Covid-19 pandemic led to a shift in priorities for investors. Getty Images

The Saudi Exchange issued Environmental, Social, and Governance (ESG) disclosure guidelines to help listed companies report on their sustainable practices.

The guidelines will help more than 200 listed companies and prospective firms looking to go public with their ESG reporting and will raise awareness about it in the local market, the exchange said.

"Sustainable investment practices play a significant role across global markets and we have a responsibility to highlight the importance of ESG and the opportunities ESG presents for all our market participants and stakeholders,” Mohammed Al-Rumaih, chief executive of Saudi Exchange, said.

"With ESG becoming an increasingly critical part of decision-making for local and international investors, these guidelines will encourage companies to voluntarily disclose their ESG performance."

ESG investments have gained traction after the Covid-19 pandemic led to a shift in priorities for investors. Inflows into sustainable investment funds grew 17 per cent in the first quarter of this year to a record $185 billion, according to data provider Morningstar.

Meanwhile, a Masdar survey, which polled 525 executives leading businesses with more than $250 million in revenues, earlier this year showed the majority of them consider ESG a core objective following the pandemic.

The Saudi Exchange will help issuers deepen their understanding of ESG best practices by holding meetings with listed companies to support them in improving their ESG profiles. It will also host workshops to help raise awareness about ESG and encourage disclosures.

The exchange will also advise companies on how to improve their ESG disclosures.

"The disclosure guidelines will help to build awareness of ESG, equip listed companies to better navigate the ever-changing ESG landscape, introduce a selection of reporting options companies can follow to measure their progress and ultimately unlock the benefits from a sustainable approach to corporate growth," the exchange said.

The guidelines were developed in line with the UN SSE model guidance and will be continually updated to account for changes in the ESG landscape to ensure they remain relevant.