Companies listed on the Egyptian Stock Exchange are now under scrutiny for their performance on environmental, social and corporate governance (ESG) issues via the Standard & Poor's/EGX ESG Index launched last week during the third annual conference on corporate social responsibility (CSR) entitled, "Disclosure and Reporting on CSR Practices: Towards a sustainable competitive environment". The index is a combined effort of Standard & Poor's (S&P), the Egyptian Institute of Directors (EIoD), the Egyptian Stock Exchange (EGX) and CRISIL (Credit Rating and Information Services of India Ltd), one of India's leading ratings, research and policy advisory companies. According to an S&P press release, the index is expected to raise the quality of disclosure on ESG issues in Egypt for investors. Egypt is the first Arab and African state to launch such an index. "It took Egypt two years to prepare for the launch," Minister of Investment Mahmoud Mohieldin told the conference audience last week. Some 30 companies have committed to the index. The top 10 index companies at launch are the Commercial International Bank (CIB), Orascom Construction Industries, Al-Ezz Steel Company, Telecom Egypt, the Talaat Mustafa Group, EFG- Hermes Holding Company, Lecico Egypt, Al-Ezz Al-Dekheila Steel Alexandria, Orascom Telecom and Sidi Kerir Petrochemicals. , executive director of the EIoD told Niveen Wahish what the new index is about. What is the importance of the index? It will rank companies according to their social, environmental and corporate governance practices. It makes it easier for shareholders and investors to know which companies are "respectable" and care for their shareholders, environment, employees, etc, and which companies do not. Why does Egypt need this index? We need this index to differentiate "good companies" from "bad companies", and also to create competition between companies on trying to better care for their stakeholders. What other countries have such an index? The only country that has a similar index is India, though some countries may have other kinds of "sustainability indexes". How does it work? Every year, we evaluate EGX100 companies based on 197 variables covering corporate governance, environment, and the social practices of companies. This is done in two phases: first, we evaluate the information that companies make available voluntarily on their websites, in annual reports, and press releases, etc. Then we evaluate information available about the companies from the media, regulators, the stock exchange, and so on. Then a final score is calculated. The score is then adjusted according to the "free float" of companies. Companies that have small free float usually fall out at this stage. ESG30 companies will be different from EGX30 ones as the evaluation factors are different. A team composed of experts from the EIoD and the stock exchange automatically evaluates the EGX100 each year and selects the top 30 to be in the index. What makes a given company move up or down the index? Companies move up or down once a year only, when the evaluation is done. It is important to note that we evaluate the information available from companies and about companies. If a company is doing good things but does not disclose it, then that does not count. Who would buy or sell based on the ranking of a company in the index? The index is important for foreign investors, especially institutional investors. And also for Egyptian investors who care for their country and environment. Investors should buy shares only in companies that respect their employees and the environment.
