ESG Reporting in the Middle East: Trends and Best Practices

ESG Reporting in the Middle East: Trends and Best Practices

ESG Reporting in the Middle East: Trends and Best Practices

In 2020, the total value of assets devoted to sustainable investing reached $35 trillion globally—an astounding increase of over 1,000% since 2002.

Europe, the US, and regions in the East continue to spearhead this rapid progression. However, the pivotal role played by the Middle East in shaping global ESG development is often overlooked. With a profound dedication to sustainability, the Middle East is on a path toward becoming a regional leader in ESG reporting.

In this Sandpaper article, we delve into the current ESG trends and best practices of the Middle East to arm businesses with the expertise necessary for effective ESG reporting.

Let’s get started.

The Evolution of ESG Reporting in the Middle East

ESG reporting in the Middle East is a story of rapid progress. And while that story stretches back centuries, its modern ESG narrative began to take shape in the 2010s.

Arguably, it was the 2015 Paris Agreement that served as the most significant turning point for the region in terms of ESG reporting. From this point, countries across the Middle East began to develop and implement more robust policies related to sustainability:

  • December 2016: The Qatar Stock Exchange releases ESG guidelines
  • June 2020: Bahrain issues ESG reporting guidelines
  • September 2020: Egypt issues a green sovereign bond
  • January 2021: UAE introduces non-mandatory sustainability reporting requirements
  • November 2021: Saudi Exchange publishes ESG disclosure guidelines

These high-level policy changes have necessitated more consistent and accurate ESG reporting from companies across the Middle East region. As such, several ESG trends that are worth discussing have developed.

Trends in ESG Reporting in the Middle East

1. Sustainability Is Becoming a C-Suite Business Area

Just one year ago in 2022, PwC reported that only 18% of the companies surveyed had any kind of ESG teams and systems in place.

Today, things are vastly different—not only have most companies established such teams, but many are placing them within the C-Suite itself. The most recent iteration of that same PwC survey found that 27% of surveyed companies had appointed a Chief Sustainability Officer (CSO) to lead ESG efforts at a high level.

 

ESG- Report sample from United Arab Emirates - Design: Sandpaperme
ESG- Report sample from the United Arab Emirates – Design: Sandpaperme

2. Formal ESG Policies Are the Norm

The snowball is now rolling. As of 2023, 64% of Middle Eastern companies now have a formal ESG policy in place. While this is lagging behind the global average of 81%, it still marks a significant milestone for the Middle East. 

With the majority of stakeholders demanding better ESG performance, companies in the Middle East are now increasingly recognizing that ESG is a fundamental part of doing business. 

The result? A commitment to investing more in ESG efforts and actively developing new strategies, policies, and programs—all to prove they can provide long-term returns for investors while also taking care of their people and planet.

Not sure where to start? Check out our guide to writing sustainability policies.

3. Formal ESG Reporting Is Lacking

While ESG strategies are becoming a normalized part of operations, progress in ESG reporting has been slower.

According to PwC, only 25% of surveyed companies said they created a standalone ESG report in the last year. Around 66% of companies combined ESG reporting with another form of reporting, while a worrying 28% do not report on ESG at all.

This is something that will need to change if the Middle East wants to attract the attention of ESG-focused investors. Luckily, there is an upward trend, as many participants are currently working towards implementing formal reporting frameworks like GRI and SASB.

Ready to start planning your ESG report? Book a consultation call with Sandpaper and let’s discuss your ESG strategy today.

4. ESG Reporting Is Enabled By Stock Exchanges

Middle Eastern stock exchanges are playing an increasingly important role in driving ESG progress by adding key sustainability components to their listing rules. 

For example, the Saudi Arabian stock exchange Tadawul now requires listed companies to disclose material ESG information to maintain their listing. Likewise, the United Arab Emirates recently mandated that all companies listed on the Dubai Financial Market and Abu Dhabi Securities Exchange must provide an annual ESG report.

These initiatives demonstrate that stock exchanges across the region are taking potential reputational risks more seriously, and this is likely to have a positive impact on companies’ approach to sustainability.

These changes are already starting to entice ESG-focused investors, but more needs to happen for the Middle East to take full advantage of green financing.

5. Middle Eastern Companies Are Not Accessing Green Financing

Due to the lack of ESG information, global investors have been hesitant to invest in Middle Eastern companies. This has limited access to green financing for many sustainable projects and hindered sustainable progress in the Middle East.

Renewable energy (mainly from wind and biomass) met 46% of Germany’s demand in 2022. In contrast, renewables made up <1% of Saudi Arabia’s energy mix. There are a few renewable energy projects in the region, but more collaboration is needed to increase access to green financing.

ESG Report Sample-Client Tawuniya. Design: sandpaper
ESG Report Sample-Client Tawuniya. Design: sandpaper

To begin meeting the UN Sustainable Development Goals, Middle Eastern countries must gain access to green financing. This means that companies need to start disclosing ESG information and making their sustainability efforts more transparent. When investors have access to this data, they will be more likely to invest in these companies and projects.

 

It’s Time To Get Serious About Sustainability

At Sandpaper, we’re incredibly optimistic about the Middle East’s progression toward a sustainable future. All signs point to an increased focus on renewable energy, green financing, and equitable business environments. 

If you’re ready to start disclosing sustainability data through ESG reports, Sandpaper can help. We’ve helped clients from around the MENA region produce reports that win over investors, inspire consumers, and support sustainability initiatives.

Contact us today to learn more about our services.