ADX teams up with FTSE for new ESG index to boost sustainable investment

Index will initially include 24 companies listed on the Abu Dhabi bourse

The new ESG index will promote sustainable business practices among its listed companies, ADX says. Photo: ADX

The Abu Dhabi Securities Exchange (ADX), the Arab world's second-largest stock market by market value, and FTSE Russell have teamed up to launch an ESG (environmental, social and governance) benchmark index.

The FTSE ADX ESG Screened Index is designed to provide investors with a "transparent and tradable" benchmark based on screening criteria and methodology that ranks a company based on its ESG scores, ADX said on Tuesday.

The launch, announced before the Cop28 climate change summit begins this week in the UAE, marks a significant step towards advancing sustainable investment practices in the region, it said.

"The FTSE ADX ESG Screened Index is a strategic tool for companies on our exchange, championing sustainability measures and fostering growth opportunities,” said Abdulla Al Nuaimi, chief executive of ADX.

“Investors benefit from reliable ESG data, enabling them to make informed decisions that continue to align financial success with environmental and social responsibility."

The Abu Dhabi bourse is the first exchange in the region to use FTSE Russell as its index administrator. It is part of a strategy launched in 2021 to attract more foreign investors and enhance liquidity on the bourse. The partners have been developing and launching new indexes since then.

In January last year, the FTSE ADX General Index replaced the ADX General Index and the FTSE ADX sector indexes took the place of the existing sector indexes.

The co-branded indexes have been used to develop the ADX derivatives market, paving the way for the creation of index-linked investment products trading on its derivatives platform.

The ESG index will initially include 24 companies that are listed on the ADX market and constituents of the FTSE ADX General Index.

“By utilising ESG scores sourced from LSEG Data and Analytics, we aim to provide a transparent and objective measure of companies' ESG performance,” said Fiona Bassett, chief executive at FTSE Russell.

“This announcement aligns perfectly with our broader partnership with ADX, as we work together to deliver a world-class suite of indices that cater to the needs of both retail and institutional investors, locally and globally.”

The launch of the new index is in line with the UAE government’s objectives of its “Towards the next 50” agenda which aims to build a sustainable economy and position the UAE as the main gateway for global trade and investment, ADX said.

ADX’s ESG index will promote sustainable business practices among its listed companies and attract greater investments into responsible companies, it added.

At present, all the listed companies on the bourse issue their own sustainability reports.

The exchange has also witnessed a surge in the listings of green debt instruments.

This week, ADX listed a Dh1.3 billion ($354 million) dirham-dominated green sukuk issued by First Abu Dhabi Bank.

Last month, it revealed the listing of a $750 million green bond by Abu Dhabi clean energy company Masdar, following a listing of green bonds valued at $1 billion by the Abu Dhabi National Energy Company, known as Taqa.

“The ESG Index will further bolster the diversification of the UAE economy, contributing to the sustainable growth of our nation and reinforcing our position as a global hub for responsible investment,” Mr Al Nuaimi said.