Abu Dhabi Securities Exchange (ADX) has issued new guidelines for listed companies on environmental, social and governance disclosure, as part of its strategy to promote sustainability in the financial markets.
The set of 31 key performance indicators is in line with bourse's plan to promote economic growth and encourage businesses to adopt socially sustainable practices, ADX said in a statement on Saturday. The guidelines will also raise the standard of governance by putting sustainability standards into practice and integrating them into the strategy adopted by listed companies.
"Companies' application to the standards of this guide opens the way for investments supported by $83 trillion [Dh304.81tn] in asset allocation from various asset management funds directed to companies that apply environmental, social and corporate governance standards," ADX said.
The ESG Disclosure Guidance stems from ADX's membership in the Sustainability Group, an initiative of the industry body World Federation of Exchanges. Bourses are prioritising the long-term sustainability of the financial system to educate more market participants, proactively drive ESG disclosures and increase the number of sustainable products offered in their markets.
The new standards "will enhance ADX’s competitiveness and attract more responsible investments to the Emirate", the bourse said.
Companies must disclose critical environmental, sustainability and governance issues, ADX said.
They must identify all issues related to sustainability that may have a potential impact on its activities, products, services and relationships internally or externally.
Listed companies must choose the most important topics to report on in accordance with the principles of relative importance and stakeholder inclusion.
Listed companies are required to submit an independent report on sustainability, in line with the Global Reporting Initiative standards, ADX said.
"Sustainability reports provide the company's environmental, social and corporate disclosure content in one place and address environmental and social information needs and governance related to investors and other stakeholders, such as consumers and civil society," the bourse said.
The criteria on which these reports are based are divided into three sets of 31 basic indicators for environmental and social disclosure and corporate governance.
ADX will "soon" hold workshops for all listed companies to clarify these criteria, explain how to report on them and respond to queries from companies, it said.
Companies listed on the exchange are expected to release these reports by the end of the year.
ADX emphasised the importance of these sustainability reports, noting that investors perform a rating analysis of the environmental, social and governance disclosure performance of a listed company.
"The investment community often interprets the lack of disclosure of key sustainability indicators as a signal that the company may not be able to mitigate the risks of sustainability or seize opportunities," the Exchange said.
Such reports will help companies to boost market competitiveness and guide cost reduction by measuring issues such as energy and water consumption, it added.
ADX emphasised the importance of these sustainability reports, noting that investors perform a rating analysis of the environmental, social and governance disclosure performance of a listed company.
"The investment community often interprets the lack of disclosure of key sustainability indicators as a signal that the company may not be able to mitigate the risks of sustainability or seize opportunities," it said.
Such reports will help companies to boost market competitiveness and guide cost reduction by measuring issues such as energy and water consumption, ADX added.
"ADX has made a formal commitment to drive sustainability in financial markets by becoming a partner exchange of this United Nations-led 'Sustainable Stock Exchanges' initiative," said Khalifa Al Mansouri, acting chief executive of ADX. "We have carried out this programme to support our listed issuers in their sustainability reporting journey."
