Refinitiv and the Arab Federation of Exchanges (AFE) announced the launch of the Refinitiv AFE Low Carbon Select Index, a new benchmark offering exposure for investors to companies that actively promote and invest in low carbon activities in the Middle East and North Africa (MENA).

Rami El-Dokany, Secretary General, AFE, said:

“We are delighted to partner with Refinitiv, a provider of one of the most comprehensive ESG databases in the industry. The launch of this index will pave the way for the creation of investible products in MENA including Equity Traded Funds. The Index will also contribute to attract asset managers and investment into MENA markets.

“Our objective is to promote smarter products and companies from the region in global markets. During the COVID-19 Pandemic, the regional ESG portfolio showed a promising potential for Arab companies that are looking at consolidating their positions in this area globally.”

Shirley Barrow, Head of Indices & Benchmarks, Refinitiv, said:

“We are delighted to collaborate with the Arab Federation of Exchanges and create a new, unique ESG index for the MENA region. Through the launch of this index, companies with an environmental focus on reducing carbon emissions are recognised and it provides the market with a new solution for sustainable investing.”

According to Refinitiv, the new index was developed as regional regulators in MENA have been actively promoting investment in sustainable products, and as companies in the region increasingly embrace ESG concepts as a means of attracting investment and raising financial returns.

The index tracks the price and total return of 30 publicly traded equities, selected from a universe of equities traded in Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Saudi Arabia, Qatar, and the United Arab Emirates. The index utilizes reported CO2 levels of constituents of the starting universe, with the final index selection reflecting the principles and impact of CO2 levels.

Refinitiv noted that over the past five years, the annualized return of the Refinitiv AFE Low Carbon Select Index was 5.1%, outperforming the Refinitiv free float Index for eight MENA markets that recorded 3% over the same period. The outperformance was particularly pronounced in 2019, with the index earning a 19.75% return, compared to the Refinitiv MENA Index at 12.5%.

Nadim Najjar, Managing Director, Middle East and Africa (MEA), Refinitiv, said:

“ESG metrics are now critical in portfolio analysis, equity research, screening or quantitative analysis across MENA markets. The new index will offer investors the possibility to benchmark ESG datasets in the region and integrate them into their applications for in-depth analysis.

“The index will help us look at ESG as an asset class that needs to be prioritized as a value and as a practice in MENA markets. Investor relations programs are lagging in this part of the world and this new index will further help with the integration of MENA markets.

“Refinitiv ESG databases covers over 70% of global market cap, across more than 450 different ESG metrics, with history going back to 2002. With local language expertise and operating from different locations across the globe, we process numerous publicly available information sources with the aim of providing up-to-date, objective and comprehensive ESG coverage.”

Mohamed Farid Saleh, Chairman of AFE and Executive Chairman of The Egyptian Exchange, added:

“The index will pave the way for further integration amongst Arab markets. The project is an outcome of the collective efforts led by the AFE members to endorse and roll out ESG practices, principles and disclosures. ESG compliance will continue to drive sustainable performance for corporates and will contribute to the regional economic growth trajectory.”