Scope for Jordanian companies to step up ESG practices
Companies have increasingly adopted environmental, social and governance (ESG) practices in recent decades as a way of assessing, capturing and reporting on non-financial information that is relevant to them.
The International Finance Corporation (IFC) defines ESG as “a set of environmental, social and governance factors considered by companies when managing their operations, and investors when making investments, in respect of the risks, impacts and opportunities relating to [these issues]”. Adopting ESG principles and reporting practices helps companies identify and mitigate potential risks and provides company stakeholders with a more holistic view of an organisation’s impact.
At the forefront of driving the ESG agenda is the IFC’s integrated ESG advisory programme. It aims to encourage good sustainable finance practices and ESG management, while also promoting the flow of capital to projects that create positive impacts. This includes working with firms, market intermediaries and regulators to identify and drive ESG opportunities.
The IFC contracted Genesis Analytics to conduct a baseline assessment of the adoption of ESG policies and practices in Jordan at the firm, market and regulatory levels. We were also asked to provide actionable recommendations at each level, through which the IFC can promote further ESG adoption by way of local partnerships.
Some of the important findings of the report included:
- ESG awareness and adoption, measured by the level of disclosure, differs across company types but is, on average, still low compared to international standards. ESG reporting is conducted mostly by listed companies (led by those in the financial sector), with low rates of ESG disclosures among SMEs and unlisted companies.
- At the market level, market intermediaries, including business associations, consultancies, academia and international organisations, are important actors for driving ESG by offering training, services and guidelines. However, most have only a nascent knowledge of ESG.
- With the support of the IFC, Jordanian regulators have focused on corporate governance, with less attention on environmental and social considerations. Overall, regulators would benefit from IFC support in incorporating environmental and social considerations into existing or new guidelines and codes as well as in promoting the business case for good ESG practices to companies.