1. Efforts of EGX in Promoting Sustainability in The Capital Market
EGX Sustainability Conference
Session two: Sustainability In The Egyptian Capital Market
Medhat Nafei, PhD.
General Manager, Risk Management, EGX
25th of October 2015.

2. Contents Introduction. EGX Efforts to Promote Sustainability
ROSC Report
S&P/EGX ESG Index
Sustainable Stock Exchanges (SSE) Initiative :
Sustainability in EGX Strategy.
The Sustainability working Group (SWG)-WFE:
2015 Sustainability Year:
Future Prospective on Sustainability:

3. Introduction
EGX main goal related to sustainability is raising awareness and promoting the Concepts of Corporate Governance, Corporate Social Responsibility and Responsibility towards surrounding environment between listed companies, investor and other stakeholders, in addition to participate in enhancing and developing the ESG concept between stock exchanges regionally and worldwide.
EGX encourage listed companies to move from doing charitable activities to focus on building their corporate image and being able to manage ESG related-risks. Therefore, the company’s Corporate Social Responsibility (CSR) strategy not only helps the company improve its reputation but also becomes part of the overall risk management

4. EGX Efforts to Promote Sustainability
2004
2010
2012
2013
2014
2015
EGX embedded sustainability into its strategy
2nd ROSC report
SWG-WFE
UN- SSE Initiative
S&P/EGX ESG Index
Model for SSE Communication to Stockholder.
Ringing the bell for Gender equality, March.
SSE Model Guidance on Reporting ESG Information to Investors, launched 8th of Sep.

5. EGX Efforts to Promote Sustainability
2004
2010
2012
2013
2014
2015
EGX Participated in The Second (ROSC)
The Egyptian Exchange (EGX) realized the rationale for corporate sustainability since 2004, when EGX participated in the second Report on the Observance of Standards and Codes (ROSC), and started to implement new listing, delisting and disclosure rules (On Going Process), focusing on the concept of transparency & corporate governance, These include
The disclosure requirements (financial reporting, corporate actions, material events, shareholding structure, BOD and General meetings)
The obligation of having an independent audit committee
Some of the rules pertinent to related party transactions and conflict of interest.

6. EGX Efforts to Promote Sustainability
2004
2010
2012
2013
2014
2015
S&P/EGX ESG Index
In March 2010, EGX was the 1st stock market in the MENA region and 2nd worldwide to launch the sustainability index S&P/EGX ESG index, in cooperation with Standard and Poor's (S&P) and The Egyptian Institute of Directors (EIoD).
ESG Index encourages companies to be more transparent and to disclose their governance, social and environmental practices more clearly to benefit their means and to increase their market value.
ESG Index is targeting investors much interested in investing their money in more advocated companies to sustainable environmental, social and governance performance.
The index includes the highest 30 stocks performing in ESG aspects, from the pool of 100 Egyptian companies screened annually, and uses an innovative score- weighting scheme.

7. EGX Efforts to Promote Sustainability
2004
2010
2012
2013
2014
2015
Sustainable Stock Exchanges (SSE) Initiative :
EGX is an active member of The Sustainability Stock Exchange Initiative (SSE) since EGX with other 4 stock exchanges (Nasdaq, Johannesburg, Ibovespa and Borsa Istanbul) participated in making a public commitment to sustainability in their markets, thereby becoming a SSE Partner Exchange.
Now the SSE initiative consists of 27 members.
EGX participated in all meetings and conference calls.
EGX Participated in regular Questionnaires/ Survey.

8. EGX Efforts to Promote Sustainability
2004
2010
2012
2013
2014
2015
Sustainability in EGX Strategy:
EGX is working on raising the importance of the Concept of Corporate Social Responsibility in its Strategy for , through focusing on encouraging the listed companies to commit more to the social responsibility concept.
This can take place through disseminating the corporate social responsibility concept and promote establishing a social responsibility fund where the listed companies can participate in which will be supported by EGX and Market Regulator.

9. EGX Efforts to Promote Sustainability
2004
2010
2012
2013
2014
2015
The Sustainability working Group (SWG)-WFE:
EGX is an active member in The Sustainability working Group (SWG), Since March 2014.
The SWG is one of the World Federation of Exchanges (WFE) working groups. SWG is comprised of representatives from a diverse array of global stock exchanges with a mandate to build consensus on the purpose, practicality, and materiality of Environmental, Social, and Governance (ESG) data.
EGX participates in the annual survey of SWG.
EGX participates in SWG Report on ESG initiatives by Exchanges Worldwide.

10. EGX Efforts to Promote Sustainability
2004
2010
2012
2013
2014
2015
2015 Sustainability Year:
In late Dec 2014, EGX announced that 2015 will be EGX Sustainability year.
EGX joined the “SSE Model Guidance Advisory Group”, the group is consisted of 56 members from 21 countries. The SSE Model Guidance aimed to assist both exchanges and companies with ESG reporting and related issues.
Jan 2015, EGX acknowledged for pioneer issuing of the “Communication to stakeholder” as a model for other SSE initiative members.
March 2015; EGX celebrated UN Women Bell Ringing Event, “Ringing the Bell for Gender Equality”.
Sep 2015: EGX acknowledged for being part of advisory group, in the launching of “Model Guidance on Reporting ESG Information to Investors: A voluntary tool for stock exchanges to guide issuers”.

11. Future Prospective on Sustainability
In March 2016: EGX is committed to participate in the UN Women Bell Ringing Event, “Ringing the Bell for Gender Equality”.
EGX is inviting listed companies to achieve more gender equality, as the number of Females on Board of Directors for listed companies (as of September 2015), is only (Representing only 7.2% of total number of BOD members)
By the end of 2016: EGX is committed to create a voluntary guidance for companies on reporting ESG information. 

12. Thanks

13. S&P/EGX ESG Index Score-weighting
Annual Rebalance for the top 100 actively traded companies, includes:
Phase 1
Quantitative Assessment of the companies based on public information and application of Transparency and Disclosure (T&D) methodology (Questionnaire with 197 Question)
Phase 2
Qualitative Assessment (Negative News Analysis) based on info that is available in the public domain – say in media, websites and/or other reports.
Final
Score
Composite Score based on both quantitative and qualitative assessments.

14. S&P/EGX ESG Index Score-weighting
Phase (1) Quantitative Assessment:
T&D Template for Assessing ESG includes the disclosure of;
Governance (G):
Shareholder Capital
Shareholder Rights
Financial Information
Operational Information
Board and Management Information
Board and management remuneration
Business Ethics and Corporate Responsibility.
Corporate Governance.
Environment and Social (ES):
Environmental Pollution
Natural Resources Use
Employee Relations/Job Creation
Labor Rights
Employee Health & Safety (H&S)
Equal Opportunity
Community : Human Rights
Community Investment
Customer Outreach and Product Quality.
Shareholder Capital
The number and identity of shareholders each holding more than 10%.
Shareholding in the company by individual senior managers.
Shareholding in the company by individual directors
Community Investment
Explicit policy/statement regarding community investment
Initiatives on community awareness or education
Company participation in public-private initiatives for community development .
Description/Amount of total contributions/donations to charitable initiatives (health, education etc)

15. S&P/EGX ESG Index Score-weighting
Phase (2) Qualitative Assessment:
The negative news analysis for ESG includes, reaching media for;
Governance (G):
Ownership Structure and Shareholder Rights.
Transparency, Disclosure and Audit .
Board Structure and Effectiveness
Business Ethics and Corporate Responsibility.
Environment and Social (ES):
Environmental Pollution
Natural Resources Use
Employee Relations
Labor Rights
Employee Health & Safety (H&S)
Equal Opportunity
Community: Human Rights
Product Safety and Quality
Ownership Structure and Shareholder Rights.
Clear evidence that a significant related party transaction or other corporate action occurred without prior notification or consent of minority shareholders.
Environmental Pollution
Paid substantial fines/penalties/settlements related to environmental pollution (to air, land and/or water),

16. S&P/EGX ESG Index Score-weighting
Performance of S&P/EGX ESG Index
In 2012, S&P/EGX ESG index ranked 1st worldwide with total return of 54.8% while EGX 30 ranked third with 50.8%.
Back
EGX30
EGX70
EGX100
S&P
2014
31.6%
4.2%
18.1%
40.6%