RIYADH | SAUDI ARABIA – Saudi Arabia’s stock exchange (TADAWUL) plans to launch an environmental, social or governance (ESG) index in cooperation with global index provider MSCI by the fourth quarter of this year or first quarter of 2021, the bourse’s chief executive said on Wednesday.
The index will include at least 70 Saudi listed companies and will be based on MSCI standards, Khalid Al-Hussan said at a virtual event.
‘Globally we understand that ESG is becoming an investment requirement and we don’t want to be behind this in the Saudi market’, he added.
Demand for climate-friendly and sustainable investments has been on the rise over the past few years and has seen another boost during the COVID-19 pandemic, with many investors globally shifting their focus on to businesses with more sustainable, low-carbon models.
With a market capitalization of $2.5 trillion, thanks in part to the Saudi Aramco IPO in 2019, Tadawul is the world’s 9th biggest stock market, ranked after the London Stock Exchange and ahead of Canada’s Toronto Stock Exchange, according to World Federation of Exchanges data.
Saudi authorities have introduced a raft of reforms to attract overseas share buyers and issuers as part of efforts to attract foreign capital and diversify the oil-dependent economy.
In 2019, the Saudi market joined the FTSE Emerging All Cap Index and the MSCI Emerging Markets Index, triggering more foreign fund inflows.
The bourse also plans to issue ESG guidelines for Saudi listed corporates in the fourth quarter.