{"id":556127,"date":"2021-10-12T04:02:19","date_gmt":"2021-10-12T04:02:19","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/goinggreens\/esg-reporting-is-coming-to-egypt-in-2023-part-ii\/"},"modified":"2021-10-12T04:02:19","modified_gmt":"2021-10-12T04:02:19","slug":"esg-reporting-is-coming-to-egypt-in-2023-part-ii","status":"publish","type":"goinggreen","link":"https:\/\/enterpriseam.com\/egypt\/goinggreens\/esg-reporting-is-coming-to-egypt-in-2023-part-ii\/","title":{"rendered":"ESG reporting is coming to Egypt in 2023 (Part II)"},"content":{"rendered":"

<\/a> POLL- ESG reporting is becoming mandatory in Egypt in 2023. Are EGX-listed companies ready for it? <\/strong>EGX-listed firms and NBFS companies will be required to file mandatory annual ESG reports starting from 2022. In Part 1<\/a>, we talked about what the ESG reporting requirements are and what they'll entail. In part two, we ask EGX-listed companies about implementing the reporting requirements, how they translate into actual policies within companies, and (for those who have already started) whether they are seeing an improvement in investor sentiment as a result.<\/p>\n

Sustainability reports aren\u2019t new for listed companies: Elsewedy Electric <\/strong>undertook sustainability reporting in 2017 and now issues carbon footprint reports to monitor their plan to become carbon neutral or reach zero carbon by 2030, Senior IR Manager Tarek Yehia told us. Meanwhile, for Cleopatra Hospital<\/strong>, ESG reporting was implemented from the very start, said Hassan Fikry, the corporate strategy and IR director. The hospital group\u2019s main shareholder and core investors had mandated that they receive sustainability reports even before they listed on the EGX in 2016. Edita <\/strong>has been issuing sustainability reports since 2018 as ESGs and active reporting increasingly became a criteria for foreign investors, Menatallah Shams El Din, Edita\u2019s Investor Relations and Business Development Senior Director, told Enterprise. Edita is currently working on a sustainability report for 2021.<\/p>\n

(** NEED HELP WITH YOUR OWN REPORT? ** Our parent company can help.<\/strong> Inktank<\/a> is Egypt\u2019s leading investor relations, ESG and corporate reporting firm. Reach out to Fady Sherif on fsherif@inktankir.com<\/a> if you\u2019d like to get the conversation started.)<\/p>\n

Which is precisely why the FRA made ESG reporting a requirement:<\/strong> Companies here are missing out on international partnerships and foreign investors, because they do not implement sustainability disclosures, Sina Hbous, the executive director of the Regional Center for Sustainable Finance and the advisor to the FRA\u2019s Sustainability Center\u2019s chairman, told Enterprise. In a survey<\/a> by EY, 91% of institutional investors said ESGs and other nonfinancial performance indicators have played a pivotal role in their investment decision-making in 2020.<\/p>\n

Did the foreign investors come running? <\/strong>For Edita, the sustainability reports were well received by foreign investors, Shams El Din tells us. Since it\u2019s still early days in ESG reporting, foreign investors appreciate the transparency and are more concerned with looking at strategy as opposed to where firms are now. Edita works on rolling out new and updated policies and initiatives to ensure ESG standards are met in tandem with the firm\u2019s operational expansion, she explains. Cleopatra had a similar experience, with more and more investors asking about ESG in the past year. Investors frequently say \u201cour ESG person will give you a call,\u201d Fikry told us. It\u2019s become very important and makes companies attractive to international investors when they have a good ESG story, he said.<\/p>\n

Has putting out sustainability reports been a difficult process? <\/strong>Since Cleopatra was familiar with this kind of reporting internally, it only took a few months to publish a sustainability report publicly. However, in the case of Elsewedy Electric, it first took around two years to put together a sustainability report. It took time for the training and data collection to take place and for all of the factories to understand the new reporting technique before Elsewedy Electric began to tailor a digitalized system to support the data collection, Yehia said. Edita\u2019s internal operations department has been measuring carbon emissions for years, Shams El Din said.<\/p>\n

When it comes to implementing ESG policies, some <\/strong>parameters <\/strong>are more difficult than others, particularly environmental-related policies, <\/strong>IR managers tell us. For Elsewedy Electric, environmental initiatives are the hardest as they need a long-term plan while being in line with climate, water, and energy requirements and policies used globally, Yehia said. In the short-term there are added costs to adjust, purchase and upgrade facilities in factories, but in the long-term the move translates into higher quality products and growth, Yehia says. Edita has also been undertaking initiatives to decrease greenhouse gas emissions and water usage, Shams El Din said.<\/p>\n

Meanwhile, gender and governance factors are reportedly the easiest: <\/strong>These parameters require adopting new policies as opposed to big investments and changes in operations, Yehia explained.<\/p>\n

We need to bear in mind that <\/strong>the requirements don\u2019t necessarily mean that companies will all now have an ESG strategy in place. <\/strong>\u201cThe FRA can not force firms to undertake an ESG strategy, but just push them to report on what they\u2019re currently doing,\u201d Hbous stressed. It\u2019s not under the FRA\u2019s jurisdiction to mandate that ESG practices are adopted, and the authority does not realistically expect all companies to be compliant with ESG strategies even after the grace period. However, having the reporting requirement in place keeps firms aware of the long-term threat climate change has on their operations and motivates them to undertake sustainability initiatives to stay competitive against their peers in the market.<\/p>\n

What else can firms do internally for the transition to regular ESG reporting to go smoothly? <\/strong>The most important step is to start institutionalizing sustainability within the organization by having a dedicated person or department \u2014 depending on the size of the company, Hbous said. Then they should develop their own strategy or vision and outline the steps to start implementing it. \u201cIt doesn\u2019t have to be costly at all, it\u2019s all about efficiently managing resources,\u201d she added.<\/p>\n

Want more? Check out <\/strong>part I<\/a><\/strong> of our reporting on the new ESG requirements, where we break down what exactly will be required of companies once the requirements come into effect.<\/p>\n

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