ESG and financial performance in the Gulf

ESG and financial performance in the Gulf

ESG and financial performance in the Gulf
Gulf companies demonstrate a clear preference for investing in environmental factors. (AFP/File)
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Can corporate sustainability truly deliver financial benefits? Without a clear business rationale, ESG initiatives risk becoming hollow exercises in reputation management or regulatory compliance. Decades of research have consistently demonstrated that corporate sustainability can generate tangible financial returns in many regions. However, scholarly research on the Gulf Cooperation Council (GCC) region’s corporate sustainability practices has been very limited, often due to the perception that these companies adopted ESG initiatives later than their global peers. To address this knowledge gap, a group of three scholars (Catalina Stefanescu-Cuntze, Catarina Sa, and myself) have recently completed the first comprehensive study of GCC companies through an ESG lens. This research is currently under peer review at a leading finance journal.

Our study analyzed monthly ESG data for 54 publicly traded firms in the GCC region from January 2009 to May 2023. We included ESG scores, as well as separate E, S, and G scores, along with company size, stock returns, country, and industry information. Our sample covered large, mid-, and small-cap companies across 11 industries. To examine the relationship between ESG practices and financial performance, we employed random effects panel regressions using stock returns as a measure of performance. We considered lags of 12, 18, and 24 months for ESG scores to account for potential time delays between ESG initiatives and financial outcomes. For example, investing in cleaner energy sources may lead to long-term cost savings, but the initial investment could show up as a decrease in short-term profits (and higher ESG scores). Additionally, we controlled for market-wide returns to isolate the specific potential impact of ESG on firms’ stock performance.

What are the results? Contrary to the common belief that ESG performance directly impacts stock market performance, our study challenges this notion in the Gulf region. While ESG practices may positively contribute to sales, profits, and margins, investors do not appear to react strongly to companies’ ESG credentials, whether positive or negative. When we expanded our analysis to also consider individual environmental, social, and governance scores, market returns consistently emerge as the primary driver of stock price movements, leaving little room for ESG factors to explain variations.

While ESG practices may positively contribute to sales, profits, and margins, investors do not appear to react strongly to companies’ ESG credentials, whether positive or negative.

Rodrigo Tavares

Given these results, we have set out to consider the rare possibility of an inverse correlation, that is, whether financial performance could pave the way for better ESG scores. And indeed, we found positive evidence. In practical terms, the study demonstrates that firms allocate a portion of their profits toward enhancing corporate sustainability, with a particular emphasis on governance and environmental considerations. Gulf companies, especially those better endowed with resources, prioritize initiatives that bolster their sustainability credentials.

Gulf companies demonstrate a clear preference for investing in environmental factors (the “E” of ESG), likely reflecting a strategic alignment with national visions focused on economic decarbonization. It may reflect the region’s top-down approach, as seen in initiatives like Saudi Arabia’s Vision 2030, which encourages companies to support energy transition plans. Better-resourced companies are more capable of making significant contributions to these efforts. Similarly, GCC companies also direct their internal resources to improve governance practices (the “G” of ESG) in line with top-down guidelines. Most countries in the region have recently updated their corporate governance codes to improve the overall business environment, attract foreign direct investment (FDI), and facilitate access to capital markets with lower funding costs.

The study also reveals that the positive impact of these corporate initiatives on Gulf companies’ ESG scores diminishes over time, particularly after 24 months, suggesting a potential lack of sustained commitment to sustainability practices. This could be due to factors such as insufficient expertise in sustainability or challenges in maintaining consistent efficiency. Ensuring the long-term sustainability of ESG initiatives requires ongoing investment and commitment. Integrating ESG considerations into core strategic planning and operational processes is crucial for achieving sustained impact.

The findings suggest that GCC policymakers and corporate governance bodies should consider the temporal aspect when designing regulations and incentives for ESG investments. The study’s results are clear. Short-term initiatives, while ethical and commendable, are not enough to drive sustainable change in the GCC region.

Rodrigo Tavares is an invited full professor of sustainable finance at Nova School of Business and Economics, founder and CEO of the Granito Group, and former head of the Office of Foreign Affairs of the Sao Paulo state government.

 

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point of view

Filipino music, culture celebrated at Riyadh’s Global Harmony event

Filipino music, culture celebrated at Riyadh’s Global Harmony event
Updated 15 min 53 sec ago
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Filipino music, culture celebrated at Riyadh’s Global Harmony event

Filipino music, culture celebrated at Riyadh’s Global Harmony event
  • Children from the International Philippines School get the chance to put on a dance show
  • Launched as part of the Riyadh Season, the initiative opened last week highlighting Indian culture

RIYADH: Members of Saudi Arabia’s Filipino expatriate community are celebrating their culture with lively festivities in Suwaidi Park this week.

As part of the Ministry of Media’s Global Harmony initiative, a number of Filipino superstars are visiting the Kingdom’s capital to perform.

One such entertainer is DJ Jimmy Nocon, who energized the crowd with his upbeat set marked by trademark live drumming.

Speaking to Arab News after the show, he described how it felt to play for a crowd of mostly Filipino expatriates.

DJ Jimmy Nocon performs at the Global Harmony initiative event celebrating Filipino culture at Riyadh’s Suwaidi Park on Oct. 24, 2024. (AN photo/Abdulrahman bin Shalhoub)

He said: “It’s very special; it feels amazing. Of course, spinning, performing in front of my fellow Filipinos is very huge for me. It’s my pleasure.”

It was especially important, he said, to put on a show for his compatriots, known as Overseas Filipino Workers back home, who often make significant personal sacrifices in order to work in Saudi Arabia and send remittances to support their families.

He said: “I would like to thank, of course, Saudi Arabia’s government for having us and for having this event. So thank you so much.”

Remittances from OFWs make up a significant proportion of the Asian nation’s gross domestic product: 8.5 percent, according to the official Philippine News Agency.

There are 725,890 Filipinos living in Saudi Arabia, according to the 2022 national census, making them one of the largest expatriate populations in the country.

Many of them are employed in the medical field, with an estimated 130,000 Filipino nurses working in Saudi hospitals and clinics.

Members of the public celebrate Filipino music and culture at the Global Harmony initiative event at Riyadh’s Suwaidi Park on Oct. 24, 2024. (AN photo/Abdulrahman bin Shalhoub)

Cheysser Pragillata is one of those nurses, and she told Arab News that the Global Harmony event was a good chance to socialize and take a break from a demanding job.

She said: “It can help you to relieve your stress at work, this kind of event. It’s really helping us, for our social life, going out with our friends.”

Pragillata has lived in Saudi Arabia for eight years, and calls it her “second home.”

Describing the benefits of living in the Kingdom, she said: “It really gave me a chance to improve my career and (there are) a lot of great opportunities here for us.”

As well as the rousing performance from DJ Jimmy, a series of performers and dancers also took to the stage at the event, including The Power Duo, the winners of “Pilipinas Got Talent.”

While the show on the main stage got underway, a dynamic marching band with dancers clad in bright colors wended its way through the park’s walkways.

A dancer performs in the parade in Riyadh's Suwaidi Park as part of the Global Harmony initiative celebrating Filipino culture on Oct. 24, 2024. (AN photo/Abdulrahman bin Shalhoub)

Children from the International Philippines School also got the chance to put on a dance show for proud parents and members of the public.

Kurt Dabalos came to support his daughter for the dance show, but stayed for the atmosphere.

He told Arab News: “We came here for, firstly, to be honest, because my daughter is performing, but if my daughter (was not) performing, I think I would still come here just to appreciate the hospitality of Saudi Arabia in welcoming the Filipinos, having this kind of activity for us all.”

The Global Harmony initiative was launched on Oct. 17 and began with music and dance to celebrate the culture of Indian expatriates.

While this week gives the country’s Filipino community the spotlight, next week will highlight Indonesian culture (Oct. 26-29), followed by Pakistani (Oct. 30-Nov 2), Yemeni (Nov. 3-6), Sudanese (Nov. 7-16), Jordanian, Lebanese and Syrian (Nov. 17-19), Bangladeshi (Nov. 20-23), and Egyptian (Nov. 24-30).
 


Israeli military launches strikes on military targets in Iran

Israeli military launches strikes on military targets in Iran
Updated 38 min 53 sec ago
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Israeli military launches strikes on military targets in Iran

Israeli military launches strikes on military targets in Iran
  • Iran’s state TV said Tehran’s airports including Imam Khomeini International airport were “normal,” after it reported several explosions around the capital
  • Syrian state media said Israeli air strikes also targeted some military sites in central and southern Syria

RIYADH: Israel launched air strikes against targets in Iran early Saturday, with the Israel Defense Forces announcing on social media that it was in "response to months of continuous attacks" by the Iranian regime.

"Right now the Israel Defense Forces is conducting precise strikes on military targets in Iran," the IDF statement on X said.

Israel has been planning a response to a ballistic-missile barrage carried out by Iran on Oct. 1, Tehran’s second direct attack on Israel in six months.

In its statement, the IDF said: "The regime in Iran and its proxies in the region have been relentlessly attacking Israel since October 7th—on seven fronts—including direct attacks from Iranian soil. Like every other sovereign country in the world, the State of Israel has the right and the duty to respond.

"Our defensive and offensive capabilities are fully mobilized. We will do whatever necessary to defend the State of Israel and the people of Israel," said the statement read by Rear Admiral Daniel Hagari, chief spokesman of the Israel Defense Forces.

In Tehran, the Iranian capital, the sound of explosions could be heard, with state-run media there initially acknowledging at least six blasts were heard around Tehran and saying some of the sounds came from air defense systems around the city. 

A Tehran resident told The Associated Press that at least seven explosions could be heard, which rattled the surrounding area. The resident spoke on condition of anonymity for fear of reprisals.

Iran’s state TV later said that operations at Tehran’s airports including Imam Khomeini International airport were “normal.”

“Operations at Imam Khomeini International Airport and Mehrabad Airport are normal and they continue to operate according to the schedule,” the state TV presenter said, citing the chiefs of Mehrabad and Imam Khomeini airports.

Israel's strikes on Iran did not include attacking Iranian nuclear facilities or oil fields, and focused on military targets, NBC News and ABC News reported, citing an Israeli official.

In Washington, White House National Security Council spokesman Sean Savett said the “targeted strikes on military targets” are “an exercise of self-defense and in response to Iran’s ballistic missile attack against Israel on October 1.”

The United States was “informed beforehand and there is no US involvement,” a US defense official told AFP, under the condition of anonymity.

The official did not say how far in advance the United States had been informed or what had been shared by Israel.

Meanwhile, Syrian state media said Israeli air strikes also targeted some military sites in central and southern Syria.

Iran has launched two ballistic missile attacks on Israel in recent months amid the ongoing Israel-Hamas war in the Gaza Strip that began with the Hamas attack on Israel on Oct. 7, 2023. Israel also has launched a ground invasion of Lebanon.
The strike happened just as US Secretary of State Antony Blinken was arriving back in the US after a tour of the Middle East where he and other US officials had warned Israel to tender a response that would not further escalate the conflict in the region and exclude nuclear sites in Iran.
White House National Security Council spokesman Sean Savett said in a statement that “we understand that Israel is conducting targeted strikes against military targets in Iran” and referred reporters to the Israeli government for more details on their operation.
Israel had vowed to hit Iran hard following a massive Iranian missile barrage on Oct. 1. Iran said its barrage was in response to deadly Israeli attacks against its proxy in Lebanon, Hezbollah, and it has promised to respond to any retaliatory strikes.
Israel and Iran have been bitter foes since the 1979 Islamic Revolution. Israel considers Iran to be its greatest threat, citing its leaders’ calls for Israel’s destruction, their support for anti-Israel militant groups and the country’s nuclear program.
Israel and Iran have been locked in a yearslong shadow war. A suspected Israeli assassination campaign has killed top Iranian nuclear scientists. Iranian nuclear installations have been hacked or sabotaged, all in mysterious attacks blamed on Israel. Meanwhile, Iran has been blamed for a series of attacks on shipping in the Middle East in recent years, which later grew into the attacks by Yemen’s Houthi rebels on shipping through the Red Sea corridor.
But since Hamas’ Oct. 7 attack, the battle has increasingly moved into the open. Israel has recently turned its attention to Hezbollah, which has been firing rockets into Israel since the war in Gaza began. Throughout the year, a number of top Iranian military figures have been killed in Israeli strikes in Syria and Lebanon.
Iran fired a wave of missiles and drones at Israel last April after two Iranian generals were killed in an apparent Israeli airstrike in Syria on an Iranian diplomatic post. The missiles and drones caused minimum damage, and Israel — under pressure from Western countries to show restraint — responded with a limited strike.
But after Iran’s early October missile strike, Israel promised a tougher response.
 

(With Agencies)


Islamic University of Kyrgyzstan awards honorary doctorate to Prophet’s Mosque imam

Islamic University of Kyrgyzstan awards honorary doctorate to Prophet’s Mosque imam
Updated 26 October 2024
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Islamic University of Kyrgyzstan awards honorary doctorate to Prophet’s Mosque imam

Islamic University of Kyrgyzstan awards honorary doctorate to Prophet’s Mosque imam

BISHKEK: The Islamic University of Kyrgyzstan in Bishkek awarded an honorary doctorate to Sheikh Dr. Salah bin Mohammed Al-Budair, imam of the Prophet’s Mosque in Madinah, in recognition of his continuous service to Islam and Muslims.

The announcement was made during an official reception at the university, attended by Saudi Ambassador to the Kyrgyz Republic Ibrahim bin Radi Al-Radi, university president and Council of Scholars member Abdulshakur bin Islam Narmatov, along with university officials and students.

Narmatov expressed gratitude to King Salman and Crown Prince Mohammed bin Salman for their service to Islam, Muslims, the Two Holy Mosques, and other holy sites. He prayed for Saudi Arabia’s protection and prosperity.
 

 

 

 

 

 

 


Book Review: ‘Behave’ by Robert Sapolsky

Book Review: ‘Behave’ by Robert Sapolsky
Updated 26 October 2024
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Book Review: ‘Behave’ by Robert Sapolsky

Book Review: ‘Behave’ by Robert Sapolsky
  • Sapolsky makes the reader eat their vegetables, so to speak, with the science, but the resounding feeling they are left with comes from the dessert

Robert Sapolsky is a Stanford neuroscientist who has spent much of his adult life studying the behavior of baboons in Africa.

Reflecting on the similarities between the savannah-dwelling primates and our own species, Sapolsky rose to YouTube fame with a series of Stanford lectures on human behavior in the early 2010s.

His 2017 New York Times bestseller “Behave” is the product of a lifetime of research, capitalizing on his internet popularity.

Structured into sections that attempt to explain human behavior over different spans of time — starting with studies of brain chemistry moments before an action takes place, and ranging all the way through to the history of human evolution — the book mixes in-depth scientific fact with broader views of culture and society.

If the reader can wade through the technical descriptions of dendrites, axons, and action potentials, they are rewarded with Sapolsky’s profound observations on what exactly it means to be human.

Without giving too much away, the scientific studies presented in the first half of the book are later revealed to be evidence for some of Sapolsky’s more unorthodox theories on free will, society, and the justice system which, if presented without the preceding pages of argument, might not be quite as digestible.

Sapolsky makes the reader eat their vegetables, so to speak, with the science, but the resounding feeling they are left with comes from the dessert: his heartfelt take on compassion, morality, and the progress that humankind is making in becoming kinder despite the darker aspects of our nature.
 


Culinary event in Japan to highlight rich Saudi culture

Culinary event in Japan to highlight rich Saudi culture
Updated 26 October 2024
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Culinary event in Japan to highlight rich Saudi culture

Culinary event in Japan to highlight rich Saudi culture

RIYADH: The Culinary Arts Commission will host the Taste of Saudi Culture event in Tokyo, Japan, from Nov. 8-10, showcasing the rich culinary culture of Saudi Arabia and highlighting the diversity of dishes in the Kingdom.

The event will feature booths presenting authentic Saudi dishes and products, live performances and a range of other cultural activities.

It highlights the commission’s efforts to promote Saudi culinary arts internationally and showcase the Kingdom’s culture.