BAHRAIN BOURSE ESG REPORTING GUIDE Supporting sustainable capital markets through enhanced disclosure CONTENT Page 03 Acknowledgment Page 04 Introduction Page 05 Purpose of the Guide Page 06 What is ESG? Page 07 The rise of ESG – Overview of regional and international drivers 07 Investors 08 Credit rating agencies 08 ESG Rating Agencies 09 Sovereign Wealth Funds 09 Banks 10 Regulators 10 Stock Exchanges Page 12 Importance of ESG Reporting 12 Aligning with Bahrain Vision 2030 and the Government Action Plan 14 Supporting the UN Sustainable Development Goals 15 Meeting requirements of investors, ESG rating agencies, and sustainability indices 15 Strengthening financial performance, enhancing reputation and global competitiveness 16 Meeting regulatory requirements 17 Minimising risks CONTENT Page 18 How to Report on ESG? 18 Identifying the themes and defining material issues 18 Identifying and engaging stakeholders 18 Aligning report with corporate strategy and Bahrain Vision 2030 18 Referring to regional and international sector-specific standards (such as ISO) 18 Evaluating relevant performance indicators 19 Collecting quantitative data, studying trends and setting targets 19 Choosing reporting format and publication channels 19 Internal audit and/or external assurance Page 20 Bahrain Bourse sustainability efforts Page 21 Global Reporting initiatives and frameworks Page 23 Appendix A: Reporting on ESG Key Performance Indicators – 32 KPIs Page 30 About Bahrain Bourse 30 Who we are 30 What we do ACKNOWLEDGMENT Bahrain Bourse would like to thank Sustainability Excellence, listed companies, investors, and all stakeholders for their participation in the development of this guide. Bahrain Bourse would also like to extend its thanks to the Middle East Investor Relations Association (‘MEIRA’) and to the founding members of MEIRA - Bahrain Chapter: Aluminium Bahrain (‘ALBA’), Bank ABC, Bahrain Telecommunications Company (‘Batelco’), Ithmaar Holding, National Bank of Bahrain, and SICO BSC (c) for their valuable input. Further Bahrain Bourse would also like to thank Central Bank of Bahrain, Supreme Council for Environment, Supreme Council for Women, and Bahrain Economic Development Board. 03 INTRODUCTION The increased focus on sustainable development, By 2030, Bahrain’s private sector should be able to drive climate change, and the global transition to more a sustainable economic growth, leveraging Bahrain sustainable and inclusive economies have led to a rapid vision’s three guiding principles: sustainability, increase in demand for transparent and comprehensive fairness, and competitiveness. Economic growth can reporting on Environmental, Social and Governance only be achieved through preserving the environment, (ESG) information. the Kingdom's cultural heritage, and the long-term well-being of Bahraini citizens. Just as investors use traditional financial data to assess the business’s performance, they use ESG data to Stock exchanges have historically played an evaluate the sustainability risks that may affect the important role in the development of capital market company’s financial performance. Depending on the institutions, promoting transparency and good investment strategy, ESG data can inform various governance. This role has expanded to further include stages of the investment process, including stock the introduction of capital market policies and selection, portfolio construction and risk management. instruments designed to promote more sustainable This additional layer of extra-financial information can investment practices, address the challenges posed by support investors make better informed decisions. climate change, and support the achievement of the UN Sustainable Development Goals (SDGs). Most ESG data comes from companies’ public disclosures. Companies disclose this information Bahrain Bourse takes the ambition of the Bahrain through a number of channels, including sustainability Economic Vision at heart. We understand our critical reports, annual reports, website, and public data role as a catalyst for sustainable capital markets and as agencies such as CDP (formerly known as Carbon a key driving force to promote ESG disclosure among Disclosure Project). Investors can get relevant listed companies. As a Partner Exchange member of the information directly from these sources. They can also Sustainable Stock Exchanges (SSE) initiative1 , and a purchase this data from third-party data providers - member of the World Federation of Exchanges (WFE)2 , ESG rating agencies - that collect, aggregate, and Bahrain Bourse has made a formal commitment to drive package the ESG data disclosed by companies to sustainability in capital markets. generate insights on the company’s ESG performance and associated sustainability risks. This ESG reporting guidance is an important new tool that aims to encourage and assist listed issuers in The principles of sustainability are well embedded in providing ESG information that investors use to inform Bahrain Economic Vision 2030. Companies in Bahrain their investment decisions while also supporting are expected to create shared value and inclusive companies align with Bahrain Economic Vision 2030 growth, to assess their impacts on capitals and and the UN Sustainable Development Goals (SDGs). We resources, and to contribute national, regional and hope this report helps improve transparency and global visions and plans, such as accelerating the disclosure in the capital markets of Bahrain. fulfilment of the United Nations Sustainable Development Goals - a call to action to protect the planet and guarantee the global well-being of people. These common goals require the active involvement of individuals, businesses, administrations and countries Sustainable Stock Exchanges initiative (SSE) around the world. 1 https://sseinitiative.org/ 2 World Federation of Exchanges (WFE) https://www.world-exchanges.org/ 04 PURPOSE OF THE GUIDE This ESG reporting guidance aims to increase This guide also encourages listed companies to disclose awareness and understanding of the importance and a set of 32 ESG metrics and indicators - in alignment benefits of ESG reporting and disclosure by with the recommendations of the Sustainable Stock establishing a roadmap for companies on integrating Exchanges (SSE) initiative and the World Federation of ESG into business decisions, company strategy, Exchanges (WFE). These ESG KPIs are listed in reporting, and operations. Appendix A of this guidance document. This guide is intended for all companies listed on Bahrain Bourse and This guide aims to assist listed companies to address its implementation is on a voluntary basis. environmental, social and governance (ESG) issues in their reporting to meet the requirements of institutional investors for material ESG information. 05 What is ESG? The term ESG encompasses the broad set of workers and whether they create a corporate culture environmental, social and corporate governance that builds trust and fosters innovation3. considerations that play a role in an organisation’s ability to execute their business strategy, track Investors use ESG data to screen potential investments. performance and create value. But unlike Socially Responsible Investments (SRI), which is based on ethical and moral criteria and uses ESG reporting has become essential, not only for mostly negative screens, such as excluding in tobacco investors seeking performance indicators, but also for or gambling products, ESG investing is based on the companies trying to increase operational efficiency and assumption that ESG factors have financial relevance. decrease exposure to risks. ESG describes three categories of factors that may ESG factors cover a wide spectrum of issues that were affect an organization’s performance, and therefore, its traditionally not part of financial analysis yet may have value. ESG criteria are best suited to effectively assess financial relevance. This might include how an organization’s resilience, adaptability, long-term corporations respond to climate change, how good they sustainability and capacity for growth. are with water management, how effective their health and safety systems are in preventing accidents, how they manage their supply chains, how they treat their The table below provides examples of ESG criteria. Environmental Social Corporate Governance Independence of board and board Environmental management Workforce training committees GHG emissions Workplace safety and employee Internal controls and audits wellbeing Energy management Diversity and Inclusion Executive compensation Water and wastewater management Human rights and community Shareholders’ rights relations Waste and hazardous materials Customer privacy and data management Business ethics security Ecological impacts and biodiversity Product quality and safety 3 Forbes “The Remarkable Rise of ESG”– July 2018 https://www.forbes.com/sites/georgkell/2018/07/11/the-remarkable-rise-of-esg/#455e43241695 06 THE RISE OF ESG – OVERVIEW OF REGIONAL AND INTERNATIONAL DRIVERS Investors ESG information provides insights into the quality of Large asset owners and asset managers are at the top management and the environmental and social impact of the investment chain and, therefore, have an that can affect financial performance; it also helps important role to play in influencing the organizations in investors identify companies that are well positioned to which they invest to provide better climate-related sustain their performance over the long term and avoid financial disclosures. In January 2020, BlackRock chief those which are likely to underperform or fail. executive officer, Larry Fink, issued a letter8 to As of April 2019, more than 2,300 investment companies declaring and reaffirming BlackRock’s management firms representing USD86 trillion in asset stance on sustainable investing. In support of this new under management have pledged to integrate ESG commitment towards sustainability and climate factors in their investment decisions by becoming integrated portfolios, Blackrock announced a number of signatories to the United Nations backed Principles for initiatives9 to place sustainability at the centre of its Responsible Investment (PRI). This represents an investment approach. The asset management company astronomical growth of 309% in assets under also commits to vote against management and board management since 2010 when signatories represented directors when companies are not making sufficient USD21 trillion in assets under management4. progress on sustainability-related disclosures and business practices. The Global Sustainable Investment Alliance (GSIA) 2018 report finds that sustainable investing assets in Europe, Goldman Sachs announced the formation of the the US, Japan, Canada, and Australia and New Zealand Sustainable Finance Group in July 2019. The were USD 30.7 trillion at the beginning of 2018, a 34 Sustainable Finance Group will aim to deliver percent increase since 20165. sustainable growth solution for the company’s clients. As climate-related uncertainty has increased, large The asset management firm also announced10 a USD institutional investors—such as pension funds, 750 billion, 10-year initiative that aims to invest in, investment funds, insurance companies, foundations, finance and advise companies and projects in nine endowments, and others—have begun to explore different areas such as clean energy, affordable educa- various approaches to managing this risk and tion, and accessible healthcare and overhauled lending capitalizing on its upside potential. Globally, a group of policies to exclude ventures like new Artic drilling. In 409 institutional investors collectively managing more January 2020, the investment bank announced that it than USD24 trillion in assets has issued a statement will no longer take a company public unless the pledging their commitment to meaningfully address company has at least one female board member11. This climate risk6. BlackRock, which manages more than mandate is the latest in a global movement that USD7 trillion globally, has set a goal to manage USD1 emphasises that diverse boards and management are trillion in sustainable mandates by 2030, from USD90 beneficial to the companies. billion at the end of 20197. 4 UNPRI https://www.unpri.org/pri/about-the-pri 5 2018 Global Sustainable Investment Review – March 2019 http://www.gsi-alliance.org/wp-content/uploads/2019/03/GSIR_Review2018.3.28.pdf 6 SASB “Converging on Climate Risk: CDSB, the SASB, and the TCFD” – September 2017 https://www.sasb.org/wp-content/uploads/2019/08/SASB_CDSB-TCFD-ConvergingOnClimateRisk-091817-web.pdf 7 Pensions and Investments “Demand for ESG means more decisions for investors” – January 2020 https://www.pionline.com/exchange-traded-funds/demand-esg-means-more-decisions-investors 8 BlackRock “Larry Fink’s Letter to CEOs - A Fundamental Reshaping of Finance” – January 2020 https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter 9 BlackRock “Sustainability as BlackRock’s New Standard for Investing” – January 2020 https://www.blackrock.com/corporate/investor-relations/blackrock-client-letter 10 Goldman Sachs “Sustainable Finance” – January 2020 https://www.goldmansachs.com/what-we-do/sustainable-finance/index.html 11 The New York Times “Goldman’s Playbook for More Diverse Corporate Boards” – January 2020 https://www.nytimes.com/2020/01/24/business/dealbook/goldman-diversity-boardroom.html 07 THE RISE OF ESG – OVERVIEW OF REGIONAL AND INTERNATIONAL DRIVERS Credit rating agencies ESG Rating Agencies Credit rating agencies are increasing their efforts to ESG rating agencies are increasingly influential in identify environmental, social and governance risks for determining how capital is allocated as they help index companies as investor and regulator demand in providers and fund managers understand and quantify sustainable investments rises amid competition from the ESG performance of companies. independent ESG ratings firms. Credit rating agencies have started to offer separate ESG scores on companies ESG ratings agencies assess and quantify the ESG in addition to their traditional assessments of performance of companies. They also measure the level creditworthiness. Three of the biggest credit-rating of exposure of a company against material industry risk agencies are already incorporating ESG factors in their and assess whether these risks are being adequately credit analysis. managed or mitigated. Ratings are usually industry-specific; key ESG issues are identified as those Fitch Ratings launched its integrated scoring system with most relevance to the industry. Through measuring which shows how ESG factors impact credit rating risk exposure against these issues, a company’s decisions. Fitch's analytical teams produce “ESG management system and performance indicators, ESG Relevance Scores” which display both the relevance rating agencies determine how a company is managing and materiality of ESG elements to the rating decision. ESG related risks. These assessments are sector-based and entity-specific, and currently apply to 1,500 ESG rating agencies have developed numerous ESG non-financial corporate ratings12. indices which are designed to help investors measure, benchmark and manage the stock performance of the S&P Global Ratings has developed a separate “ESG world's leading companies in terms of economic, Evaluation” product that takes a broader look at such environmental and social criteria. MSCI Inc. has risks, in addition to publishing reports that include developed more than 600 equity and fixed income ESG relevant ESG risks for some sectors and companies, indices, while S&P Dow Jones Indices has more than 75 including some leveraged firms. In 2019, S&P Global ESG indices. FTSE Russell, a leading provider of data acquired the ESG ratings arm of RobecoSAM, a Swiss solutions, also has a number of sustainable investment asset manager, as demand for data on sustainable indices which aim to integrate ESG and investment investments increases. As a result, S&P will be in considerations into single index solutions, sustainable charge of RobecoSAM’s annual survey of corporate investment data models, ratings and analytics15. These sustainability practices, which covers more than 5,000 indices cover a range of industries and geographical companies13. areas. Criteria are industry-specific, and scores are weighted according to different materiality and risk Moody’s Corporation announced in 2019 that it has exposure among different companies and industry acquired a majority stake in VigeoEiris, a global ESG sectors. research firm. This acquisition furthers Moody’s objective of promoting global standards for ESG for use by market participants and recognizes the increasing demand for ESG considerations from investors, issuers, capital markets and other stakeholders14. 12 FitchRatings “ESG” – Retrieved in January 2020 https://www.fitchratings.com/site/esg/faq 13 Standard & Poors “S&P acquires ESG ratings arm of RobecoSAM” – November 2019 https://www.ft.com/content/098258d6-0bc6-11ea-bb52-34c8d9dc6d84 14 Moody’s “Moody’s Acquires Majority Stake in VigeoEiris” –April 2019 https://s21.q4cdn.com/431035000/files/doc_news/2019/04/15/Moody%E2%80%99s-Acquires-Majority-Stake-in-Vigeo-Eiris-a-Global-Leader-in-ESG-Assessments.pdf 15 FTSE Russell “Sustainable Investment” – Retrieved in February 2020 https://www.ftserussell.com/index/category/sustainable-investment 08 THE RISE OF ESG – OVERVIEW OF REGIONAL AND INTERNATIONAL DRIVERS Sovereign Wealth Funds Banks In December 2017, six sovereign wealth funds came Global banks are increasingly embedding together to create the One Planet Sovereign Wealth environmental, social and governance (ESG) factors into their lending activities and risk-management Fund Working Group16. The One Planet SWF Group frameworks. includes: Abu Dhabi Investment Authority, Kuwait Investment Authority, New Zealand Superannuation Banks are making greater use of ESG risk data in their Fund, Norges Bank Investment Management of Norway, lending activities as the quality of disclosures on Public Investment Fund of the Kingdom of Saudi Arabia, corporate sustainability and climate-related risks and Qatar Investment Authority, who collectively improves, making it easier to access reliable and manage over USD3 trillion in assets. comparable data on ESG risks. In July 2019, eight large asset managers have come The Equator Principles (EPs), a risk management together to launch the One Planet Asset Manager framework, were launched in 2003 and intended for Initiative in a bid to advance the understanding of the financial institutions to assist in determining, assessing implications of climate-related risks and opportunities and managing environmental and social risk in projects. within long-term investment portfolios through the The EPs, which provide a minimum standard for due sharing of investment practices. The founding diligence and monitoring to support responsible risk members, which represent a combined USD15 trillion in decision-making, apply globally, to all industry sectors assets under management, include Amundi, BlackRock, and to four financial products 1) Project Finance BNP Paribas AM, Goldman Sachs AM, HSBC GAM, Advisory Services 2) Project Finance 3) Project-Related Natixis IM, Northern Trust AM and State Street Global Corporate Loans and 4) Bridge Loans. Currently 101 Advisors. The initiative supports the One Planet Equator Principles Financial Institutions (EPFIs)17 in 38 Sovereign Wealth Fund Working Group. countries have officially adopted the EPs, covering the majority of international project finance debt within developed and emerging markets18. Green bonds, launched by the World Bank and the European Investment Bank more than a decade ago, led the way for investments that could eventually reach into trillions of dollars in climate-related projects, including renewable energy, energy efficiency, and ecosystem protection and restoration. Green bonds are debt instruments used to finance or re-finance activities related to environmentally beneficial projects, including climate change mitigation and adaptation efforts. Green bonds finance an array of sectors from clean and efficient energy to low-carbon transport and water. Green bond issuance, has grown exponentially since its inception from virtually nothing in 2012 to USD167 billion in 201819. Green, social and sustainability-related bond market raised USD323 billion in 2019 as the growth in sustainable finance continued and are predicted to hit USD400 billion during 2020, according to Moody’s20. 16 One Planet Sovereign Wealth Fund “Framework Companion Document 2019” – October 2019 https://oneplanetswfs.org/wp-content/pdfjs/web/viewer.html?file=https://oneplanetswfs.org/download/23/online-publication/827/opswf_09_22_final-spreads-low.pdf 17 EP Association Members & Reporting – Retrieved in February 2020 https://equator-principles.com/members-reporting/ 18 The Equator Principles – Retrieved in February 2020 https://equator-principles.com/about/ 19 Standard & Poor’s “Green bond market to rebound in 2019 with 20% growth, Moody's says” – January 2019 https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/49663417 20 Wall Street Journal “Green Bonds Branch Out With Record Sale” – February 2020 https://www.wsj.com/articles/green-bonds-branch-out-with-record-sale-11581353864 09 THE RISE OF ESG – OVERVIEW OF REGIONAL AND INTERNATIONAL DRIVERS Regulators There is an increase in the regulatory requirements for Exchanges (SSE) initiative provides a multi-stakeholder reporting on ESG information. An example is the learning platform for stock exchanges, investors, introduction of the European Directive21 on mandatory regulators and companies to promote ESG in capital non-financial reporting which requires large companies markets and advance corporate performance on to publish non-financial information. The directive, environmental, social and governance issues. which was introduced in 2014 but adopted in 2016, dictates that non-financial statements should include The SSE initiative partners with stock exchanges ESG information to help investors, consumers, policy around the world to accelerate sustainability in capital makers and other stakeholders to evaluate the markets. As of the release of this ESG reporting non-financial performance of large companies and guidance, 94 stock exchanges have joined the initiative, encourages these companies to develop a responsible Bahrain Bourse joined the SSE initiative in February approach to business. 2019, reinforcing its commitment to promote sustainable and transparent capital markets in Due to its role in monitoring and assessing cooperation with listed companies and other vulnerabilities that affect the global financial system, stakeholders22. Bahrain Bourse also hosted the “Ring the Financial Stability board, an international body that the Bell for Gender Equality” to raise awareness about monitors the global financial system, established a Task the importance of gender equality across the capital Force, in December 2015, that aims to drive consistent markets, and “Ring the Bell for Financial Literacy” to climate-related financial risk disclosures. These emphasise the importance of investor education and voluntary disclosures guidelines are to be used by protection. companies to provide information for investors, lenders, insurers and other stakeholders. The World Federation of Exchanges (WFE) – in which Bahrain Bourse is an active member - has also The 32-member Task Force is global; its members were published a guidance for exchanges in June 2018, as a selected by the Financial Stability Board and come from supplement for the SSE Initiative Model Guidance, various organizations, including large banks, insurance aiming to identify specific metrics and baseline companies, asset managers, pension funds, large indicators. Since the publication of the SSE initiative non-financial companies, accounting and consulting Model Guidance and the WFE’s Guidance and Metrics, firms, and credit rating agencies. The Task Force 47 stock exchanges around the world have issued ESG developed four widely adoptable recommendations on reporting guidance for their listed companies. Over 13 climate-related financial disclosures that are additional exchanges have committed to issue an ESG applicable to organizations across sectors and guidance in 2020. jurisdictions. Stock Exchanges In October 2018, the WFE also published a set of five Co-organized by various United Nations agencies and Sustainability Principles as a formal declaration by the initiatives, such as The UN Environment Programme federation and its membership to promote sustainable Finance Initiative and the UN supported Principles for finance. Responsible Investment, the Sustainable Stock 21 Directive 2014/95/EU of The European Parliament – October 2014 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014L0095&from=EN 22 Bahrain Bourse “Bahrain Bourse Joins UN’s Sustainable Stock Exchanges Initiative” – February 2019 https://www.bahrainbourse.com/bahrain-bourse-joins-un%E2%80%99s-sustainable-stock-exchanges-initiative 10 THE RISE OF ESG – OVERVIEW OF REGIONAL AND INTERNATIONAL DRIVERS Figure 1 Growth of stock exchange sustainability activities Exchanges will work to educate participants in the exchange ecosystem about the importance of Exchanges will provide markets and sustainability issues. products that support the scaling-up of sustainable finance and reorientation of financial flows. Exchanges will promote the enhanced availability of investor relevant, decision useful ESG information. Exchanges will establish effective internal governance and operational processes and policies to support their sustainability efforts. Exchanges will actively engage with stakeholders to advance the sustainable finance agenda. Figure 2 The five WFE Sustainability Principles23 23 WFE “The World Federation of Exchanges publishes five Sustainability Principles for member exchanges” – October 2018 https://www.world-exchanges.org/news/articles/world-federation-exchanges-publishes-five-sustainability-principles-member-exchanges 11 IMPORTANCE OF ESG REPORTING Aligning with Bahrain Vision 2030 and support of the government’s goal of shifting its oil wealth-based economy to a productive and globally the Government Action Plan competitive economy, driven by a pioneering private sector. ESG reporting can support companies align with Bahrain Economic Vision 2030 – contributing to national The vision aims to drive growth and sustainability priorities and fulfilling economic growth ambitions. The through the following three pillars24 : Bahrain Economic Vision 2030 focuses on reshaping the vision of the government, society, and the economy, based around three guiding principles: sustainability, fairness, and competitiveness. Bahrain vision comes in Developing high-quality policies Delivering better-quality services Adopting a transparent and fair regulatory system Reducing independence on oil Developing a world class infrastructure Enhancing productivity and skills Diversifying the economy Capturing emerging opportunities Providing all Bahrainis with an equal start Providing access to quality health care Enabling Bahrainis through first-class education Maintaining a secure and safe environment Providing a sustainable living environment for Bahrainis and residents 24 Bahrain Vision 2030 https://www.bahrain.bh/wps/wcm/connect/38f53f2f-9ad6-423d-9c96-2dbf17810c94/Vision%2B2030%2BEnglish%2B%28low%2Bresolution%29.pdf?MOD=AJPERES 12 IMPORTANCE OF ESG REPORTING Following the launch of the Economic Vision 2030, the government’s national urban development, Economic Development Board (EDB) initiated an infrastructure and institutional reforms. The SDGs are on-going programme of economic and institutional among the pillars on which the Government's action reform. The EDB led and coordinated with local plans are based on to implement the Bahrain Vision ministries to compile the first National Economic 2030. Strategy, which serves as a roadmap to achieve the Vision. Since the adoption of sustainable development goals by the Kingdom of Bahrain, its action plan (2019-2022) has The National Development Strategy identifies the been linked to the goals of sustainable development following strategic objectives, to steer stakeholders and 2030. 78% of the objectives of the SDGs are included in the Kingdom towards the fulfilment of the Economic the government action plan. In addition, the Government Vision 2030: Cabinet has also assigned each ministry and government entity to align its objectives, plans and 1. Maintain a safe and pleasant environment policies in the current government action plan 2. Achieve sustainable quality growth (2019-2022) with the sustainable development goals. 3. Ensure excellence in infrastructure The Government aspires to achieve the goals of 4. Enhance Government performance and efficiency sustainable development by deploying three strategic 5. Enhance the quality and accessibility of social priorities that are embedded within the Government's services Program of Action 2019-2022. 6. Ensure sustainable development of strategic resources Overall, since the principles of sustainability are well embedded into the Bahrain 2030 Vision, incorporating The Vision also presents Bahrain’s efforts in achieving ESG factors in corporate reporting will certainly further the UN 2030 Agenda for Sustainable Development. The accelerate the fulfillment of the Kingdom’s sustainable Kingdom has already taken steps to achieve the SDGs, nationwide development plan. through integrating sustainable development into the Figure 3 Alignment of Bahrain Vision with UN SDGs 13 IMPORTANCE OF ESG REPORTING Supporting the UN Sustainable of capitalism to work on 17 goals that range from Development Goals ending world hunger to increasing access to clean and renewable energy. The United Nations estimates that it Over the past decade, the Kingdom of Bahrain has will take between USD5 and USD7 trillion spent reinforced its commitment to further enhance living annually to achieve all 17 SDGs, by 2030.26 By utilizing standards for the Bahraini citizens, through the power of the private sector, according to a recent emphasising sustainable development. The UN report by the Business & Sustainable Development Development Goals (SDGs) are being implemented Commission, achieving the SDGs could open up USD12 through the Government Plan of Action in collaboration trillion of market opportunities in food and agriculture, with the private sector and civil society. The cities, energy and materials, and health and well-being Government has not only made a commitment and alone and create 380 million new jobs by 2030. Beyond progress to achieve these goals, but also mapped its providing the liquidity needed to address the SDGs, the key national priorities revolving around: people, planet, private sector makes it easier for expertise and capital prosperity, peace and justice, against the SDGs 2030.25 to reach the places it is needed most. Achieving the SDGs also requires involvement of the Investors are increasingly seeking out SDG-aligned private sector. ESG reporting can support Bahraini investments. When surveyed, 88% of investors said they companies align with the SDGs – contributing to global were willing to target SDG-aligned investments as long and national priorities. The SDGs represent an as they could achieve market-level investment opportunity to create a framework for selecting, outcomes over the long run.27 The growing interest in monitoring and measuring the company’s performance sustainable finance and the use of ESG factors when based on their impact on society and the environment. selecting and monitoring investments has contributed The SDGs also create a roadmap for putting the power to better data and analytics. 25 Kingdom of Bahrain Voluntary National Review Report on the SDGS Key messages and statistical booklet https://www.bahrain.bh/wps/wcm/connect/72881a32-957e-43eb-af3b-f245bff64ac9/SDGs+EN.PDF?MOD=AJPERES 26 UNDP “Impact Investment to Close the SDG Funding Gap.” – July 2017 www.undp.org/content/undp/en/home/blog/2017/7/13/What-kind-of-blender-do-we-need-tofinance-the-SDGs-.html 27 MSCI “The State of Investing for SDG Impact Through Public Equities” – 2018 14 IMPORTANCE OF ESG REPORTING Meeting requirements of investors, Strengthening financial performance, ESG rating agencies, and enhancing reputation and global sustainability indices competitiveness Institutional investors recognize ESG factors as key Investors are increasingly embracing the idea that drivers of value, as such, they integrate these factors integrating ESG into investment strategies translates across the investment process to identify opportunities into improved corporate profits and investment and hedge risks. performance. A growing number of institutional investors are seeking to avoid financial risks associated Demand from fund beneficiaries and other with ESG factors and aiming to enhance returns by stakeholders has also driven some institutional investing in companies that have strong ESG track investors to develop sustainable investing records. Strong ESG risk awareness and management strategies.28 Millennial investors are reportedly set to can contribute to improved long-term corporate inherit an estimated USD30 trillion in wealth in the financial and investment performance, particularly coming years. A Morgan Stanley study suggests that when material ESG factors are mitigated. this group is nearly twice as likely to invest in companies and funds that meet their environmental ESG factors can provide valuable insights into possible and social values than the rest of the individual investor current and future environmental and social risks and population. 29 opportunities for corporate entities, given the impact and dependence entities have on the environment and As responsible investing is on the rise so is investors society. These ESG issues in turn have the potential to demand for ESG information. ESG rating agencies lead to a direct or indirect financial impact on the continually monitor companies’ ESG disclosures and entity's profits and investment returns. For example, performance, selecting the top performing companies through addressing environmental factors such as in the most important international sustainability vertical integration and moving production facilities indexes such as the Dow Jones Sustainability Index and closer to suppliers, companies do not only reduce the FTSE4Good. They are considered a strategic tool to greenhouse gas emissions associated with transport support investors identify the ESG risks and but also decrease costs, thus delivering both opportunities of their investment portfolio, contributing environmental and financial benefits. to the development of active and passive investment strategies. A 2016 Harvard Business School study suggests that organisations that perform well on material ESG factors ESG reporting can support companies meet the significantly outperform peers with poor performance requirements of institutional investors, rating agencies on the same issues. The study found better future stock ESG information. Companies with low ESG scores are performance and higher growth in accounting usually excluded from investment portfolios and indices profitability for firms that did well on material leading to missed opportunity for additional capital sustainability factors (as defined by the Sustainability inflows from qualified institutional investors that Accounting Standards Board - SASB) compared with integrate ESG factors in their investment decisions. firms with poor performance on these factors over a 20-year period. 30 28 McKinsey & Company “From ‘why’ to ‘why not’: Sustainable investing as the new normal” – October 2017 https://www.mckinsey.com/~/media/McKinsey/Industries/Pri- vate%20Equity%20and%20Principal%20Investors/Our%20Insights/From%20why%20to%20why%20not%20Sustainable%20investing%20as%20the%20new%20normal/From-why -to-why-not-Sustainable-investing-as-the-new-normal.ashx 29 Morgan Stanley “Sustainable Signals” – 2017 https://www.morganstanley.com/pub/content/dam/msdotcom/ideas/sustainable-signals/pdf/Sustainable_Signals_Whitepaper.pdf www.undp.org/content/undp/en/home/- blog/2017/7/13/What-kind-of-blender-do-we-need-tofinance-the-SDGs-.html 30 Mozaffar Khan, George Serafeim & Aaron Yoon “Corporate Sustainability: First Evidence on Materiality. The Accounting Review” – November 2016 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2575912 15 IMPORTANCE OF ESG REPORTING Meeting regulatory requirements The aim of regulators is to enhance the availability and company’s operations. The Kingdom of Bahrain has laid reliability of listed companies’ information in relation to down key regulations that cover Environmental, Social, ESG factors. Companies that report on key ESG and Governance issues. Few examples are presented in information not only can align with current local, the table below: regional and international regulations, but can also anticipate future regulations that may impact the The environmental legislative system in the Kingdom of Bahrain, regulated by the Supreme Council for Environment, is among the most sophisticated systems in the region. The Kingdom aims to strengthen its efforts to protect the environment and natural resources through deploying the necessary legislative structures to ensure sound use of resources and promoting sustainable economic development. The Kingdom also ratified several regional and international agreements, conventions and protocols related to protecting the environment and achieving sustainable development, including the Paris Agreement within the United Nations Framework Convention on Climate Change (UNFCCC).31 The Supreme Council for Women is the national advisory insitution to all official organiza- tions, which monitors the advancement of Bahraini women on the national and internation- al level. It proposes, drafts and follows up the implementation of public policies, national plans and strategies related to women in public life in partnership with the relevant nation- al and international stakeholders while ensuring work-life balance, family stability and nehancing the quality of life of the Bahraini community. The Bahrain Corporate Governance Code is based upon nine core Principles of corporate governance that adhere to international best practices. The purpose of the Code is to establish best-practice corporate governance principles in Bahrain, and to provide protection for investors and other company stakeholders through compliance with those principles. The Code includes recommendations to apply the principles, as well as recommendations which support the implementation of good corporate governance. The Code is issued in a “comply or explain” framework, which means companies should comply with the recommendations, or give an explanation in the case of noncompliance. Whilst this Code follows best-practice, it is nevertheless considered as the minimum standard to be applied. Companies may adopt higher standards of corporate governance, and industry regulators, in particular the Central Bank of Bahrain (CBB) may issue additional directives or guidance as appropriate. 31 Kingdom of Bahrain Supreme Council for Environment http://www.sce.gov.bh/en/NationalLegislation?cms=iQRpheuphYtJ6pyXUGiNqnTQ4pxyOsrc 32 The Supreme Council for Women https://www.scw.bh/en 33 The Corporate Governance Code – Kingdom of Bahrain – 2010 https://www.moic.gov.bh/en/FAQ/Documents/Corporate%20Governance%20Code%20Bahrain%20-%20English.pdf 16 IMPORTANCE OF ESG REPORTING Globally, investor voice is directly influencing the future ESG-related policies, regulations, and potential regulatory agenda and sustainable finance has now reputation risk in unregulated markets.35 moved onto the global regulatory agenda too. Policymakers have increasingly instituted policies Minimising risks36 requiring increased and better disclosure from investors and corporates about how they integrate and Transitioning to a lower-carbon economy may entail perform on ESG factors. In 2018, the European Commis- policy, legal, technology, and market changes to sion introduced three pieces of legislation to incentivise address mitigation and adaptation requirements and channel private sector investment into sustainable related to climate change. In order to make more development and promote ESG disclosure.34 informed financial decisions, investors aim to under- stand how climate-related risks and opportunities are 1. A Unified EU Green Classification System - likely to impact a company’s future financial position. 'Taxonomy': In 2019, an agreement was adopted by the While climate change affects nearly all economic European Parliament and Council on the creation of sectors, the level and type of exposure and the severity classification system for sustainable economic of impact of climate-related risks differs by sector, activities. This taxonomy aims to help scale up public industry, and geography. and private investments to finance the transition to a climate-neutral green economy, redirecting capital to Physical risks may have financial implications for sustainable economic activities and projects. companies, such as direct damage to assets and indirect impacts from supply chain disruption. While 2. Sustainability-related disclosures: Financial market climate change could affect markets in varied and participants will have to disclose to their clients the complex ways, resource availability, sourcing, and impact of sustainability on financial returns and the quality as well as extreme temperature changes pose impact of their investment decision on sustainability. the greatest risk on companies’ operations, supply chain, transport needs, and employee safety – 3. Climate benchmarks and benchmarks’ ESG consequently, impacting financial performance. disclosures: The main objectives of the climate Climate change has also been identified as a potential benchmarks are to allow a significant level of source of reputational risk tied to the increasingly comparability of climate benchmarks methodologies; changing customer and community demands of therefore, increasing transparency on climate change transition to a lower-carbon economy. disclosure; and reducing greenwashing. Another important risk is litigation or legal risk. Global trends further demonstrate the shift towards Reasons for legal disputes include the failure of more stringent regulations and it is expected that companies to mitigate impacts of climate change, countries all over the world will adopt similar failure to adapt to climate change, and the insufficiency legislations in the future Of the 94 Sustainable Stock of disclosure around material financial risks. Exchanges Initiative’s (SSE) partner exchanges, 24 exchanges now require ESG reporting as a listing rule. Recent research published in the Journal of Portfolio Market-based mechanisms for controlling pollution and Management37 found that companies with ESG water resources have been enacted around the world. disclosure demonstrated lower systematic risk profiles These range from carbon pricing and cap-and-trade (lower costs of capital and higher valuations) and lower schemes for carbon emissions. Businesses are idiosyncratic risk profile (higher profitability and lower anticipated to better measure and manage the ESG exposures to tail risk) than companies with weak or no impact of their activities in order to be more resilient to ESG disclosure. 34 European Commission “Financing Sustainable Growth” – 2019 https://ec.europa.eu/info/sites/info/files/business_economy_euro/accounting_and_taxes/documents/190618-sustainable-finance-factsheet_en.pdf 35 Standards and Poor’s “The ESG Advantage: Exploring Links To Corporate Financial Performance” – April 2019 https://www.spglobal.com/_assets/documents/ratings/the-esg-advantage-exploring-links-to-corporate-financial-performance-april-8-2019.pdf 36 Recommendations of the Task Force on Climate-related Financial Disclosures – June 2017 https://www.fsb-tcfd.org/wp-content/uploads/2017/06/FINAL-2017-TCFD-Report-11052018.pdf 37 MSCI – The Journal of Portfolio Management – July 2019 https://www.msci.com/documents/10199/03d6faef-2394-44e9-a119-4ca130909226 17 How to Report on ESG? Identifying the themes and defining ecosystems, all of which are affected by a company’s sustainability efforts. Identifying the major material issues stakeholders allows a company to define its most An effective report covers ESG considerations that are material issues. relevant to the business strategy and illustrates the link to both long-term and short-term value creation. Companies can also use a variety of national and Aligning report with corporate international resources to develop an initial list of ESG strategy and Bahrain Vision 2030 themes, whether these themes are generic or sector ESG reporting allows companies to gain a better specific. For example, a company can use the UN Global understanding of the links between strategic goals, Compact’s 10 Principles, SDGs, SASB, and the Global business models, risks, opportunities, operational Reporting Initiative (GRI) sector disclosures for indicators and financial performance. With strong reporting on environmental, labour, human rights and connections between each of these areas, a company’s governance issues. ability to identify and manage risks, evaluate and measure success, as well as identify future challenges Sustainability Accounting Standards Board (SASB) and opportunities will be improved. Identifying identifies financially material issues, as the issues that reporting and performance gaps enables the company are reasonably likely to impact the financial condition or to work to fulfil them, thus aligning itself with corporate operating performance of a company and therefore are strategy and with Bahrain Vision 2030, subsequently most important to investors. SASB has developed accelerating it. sector-specific standards, which outline the most material sustainability issues for each sector. Each issue is supported with quantitative and/or qualitative Referring to regional and assessments. international sector-specific standards (such as ISO) Through building a materiality matrix companies Adopting international sector specific standards and highlight issues that might pose the most risk if not certifications, such as ISO standards, allows companies tackled correctly. A materiality matrix is a to gain accountability and credibility. representation of sustainability issues identified through analysis of their significance to both stakeholders and the company’s strategy and Evaluating relevant performance long-term vision. These issues are identified based on indicators their effect on the financial performance and the Once material issues have been identified, a company operations of the company. can disclose specific performance indicators to demonstrate progress. Such indicators can also be Identifying and engaging stakeholders adopted from leading reporting agencies and initiatives Understanding the needs of the stakeholders is key in such as the GRI, SASB and Climate Disclosures the definition of the materiality matrix which will serve Standards Board (CDSB). as the basis for the ESG report. The term “stakeholders” encompasses customers, employees, suppliers, shareholders, affected communities and surrounding 18 HOW TO REPORT ON ESG? Collecting quantitative data, studying Internal audit and/or external trends and setting targets assurance Providing quantitative data allows for targets to be ESG reports are made more credible through strong achieved, trend to be set and comparisons to be made internal assessment processes and/or external assur- over different time periods within the firm or with ance. Internal audits are usually the task of an similar data from other companies. independent division within the company, which are responsible with reviewing and ensuring data collection systems are accurate and in accordance with Choosing reporting format and guidelines. External assurance can add a degree of publication channels trust, recognition and credibility. This service is usually The format and channel the ESG information is provided by third-party specialist firms. communicated through are vital to ensure the company’s sustainability performance and progress are made available to all stakeholders. Companies can choose to report using any of the following: 1. Annual reports: Annual reports are intended to give shareholders and other stakeholder group information about the company's activities and financial performance. Some companies integrate ESG issues into their annual reports, aiming to provide investors with ESG disclosure at the same time as wider information about the company. 2. Stand-alone sustainability or ESG reports: Sustainability or ESG reports address the relevant ESG information needs of investors and other stakeholders, such as consumers, employees, and the civil society. 3. Integrated reports: An Integrated Report provides insights about the financial, manufactured, intellectual, human, social and relationship, and natural capital used and affected by a company, and the interplay between these different capitals, to present the full picture of the value created by the company. 19 BAHRAIN BOURSE SUSTAINABILITY EFFORTS As a Partner Exchange member of the Sustainable Bahrain Bourse engaged with senior management of Stock Exchanges (SSE) initiative, and as an active listed companies at the individual level to further member of the World Federation of Exchanges (WFE), emphasis the business case of ESG within the company Bahrain Bourse has made a formal commitment to and provide support and guidance for ESG reporting. We promote sustainable in capital markets. The issuance of invite all our listed companies to take advantage of our this guidance constitutes a first step in our action plan one-on-one engagement sessions which are offered at to support our listed issuers. no cost. Bahrain Bourse intends to lead by example with ESG Bahrain Bourse aims to further promote dialogue reporting, and we look forward to report on our own between investors and listed companies on ESG topics. ESG performance and impact. We have therefore Our ESG action plan include promoting collaboration, integrated key ESG information that is material to ESG research and supporting the development of Bahrain Bourse - as an exchange - into our Annual sustainable financial products such as Report 2019. green/social/sustainable bonds and ESG indices. Building our internal capacity, we have deployed a training session for our senior management and staff highlighting the importance of ESG as a fundamental element in our strategy. Bahrain Bourse deployed several initiatives to promote sustainability, equality and justice. Bahrain Bourse hosted the “Ring the Bell for Gender Equality” to emphasise the importance of gender equality, and “Ring the Bell for Financial Literacy” to promote investor education and protection. Bahrain Bourse aims to continuously support our listed issuers in their ESG reporting journey. Bahrain Bourse held a workshop on Sustainability and Investor Relation (IR) Digital Solutions on September 2019 as part of our efforts to promote best IR and ESG practices in the Kingdom of Bahrain. The workshop highlighted the importance of ESG disclosure in meeting growing investors’ demands for listed companies and shed light on the importance of IR digital tools in communicating effectively with investors and stakeholders. 20 GLOBAL REPORTING INITIATIVES AND FRAMEWORKS The below summarizes the key global reporting initiatives and frameworks that can support companies report on ESG information. The Global Reporting Initiative (GRI) is an international, not-for-profit organization working in the public interest towards a sustainable global economy where organiza- tions manage their economic, environmental, social, and governance performance and impacts responsibly. Corporate and public sector reporters in over 90 countries use the GRI Guidelines. More than 24,000 reports have been registered in GRI’s Sustainability Disclosure Database. www.globalreporting.org/Pages/default.aspx The International Integrated Reporting Council (IIRC) is a group of international leaders with a mission to create the “Integrated Reporting Framework”. The Framework provides material information about an organization’s strategy, governance, performance and prospects in a concise and comparable format, a fundamental shift in corporate reporting. www.integratedreporting.org/ The Sustainability Accounting Standards Board (SASB) is a UN non-profit U.S. based organization on a mission to create and disseminate accounting standards that reporting issuers can use to disclose material sustainability factors in filings with the Securities and Exchange Commission. SASB identifies sustainability issues that are likely to affect the financial condition or operating performance of companies within an industry through a materiality map which details 26 sustainability issues across 10 sectors. www.sasb.org/ 21 GLOBAL REPORTING INITIATIVES AND FRAMEWORKS CDP (formerly the Carbon Disclosure Project) is a global not-for-profit organization, founded in 2000 and headquartered in London. CDP requests standardized climate change, water and forest information from some of the world’s largest listed companies through annual questionnaires sent on behalf of institutional investors that endorse them as ‘CDP signatories’. www.cdp.net/en The United Nations Global Compact (UNGC) is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption. It comprises more than 13,000 organizations in 80 local networks worldwide. Business participants are expected to publicly report on their progress in an annual Communication on Progress. www.unglobalcompact.org/ Financial Stability Board – Task Force of Climate-related Financial Disclosures (FSB TCFD) is a voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. The Task Force considers the physical, liability and transition risks associated with climate change and what constitutes effective financial disclosures across industries. The Task Force aims to develop climate-related disclosures that could promote more informed investment, credit, and insurance underwriting decisions and, in turn, would enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system’s exposures to climate-related risks.38 www.fsb-tcfd.org 38 Recommendations of the Task Force on Climate-related Financial Disclosures –June 2017 https://www.fsb-tcfd.org/wp-content/uploads/2017/06/FINAL-2017-TCFD-Report-11052018.pdf 22 APPENDIX A: REPORTING ON ESG KEY PERFORMANCE INDICATORS – 32 KPIS In addition to developing a comprehensive ESG report that addresses key ESG issues that investors care about, Bahrain Bourse recommends that listed companies report on the 32 Key Performance Indicators (KPIs) listed in the table below. Companies are advised to utilise the following metrics in their reporting. The KPIs have been aligned with WFE indicators, GRI standards, the UN SDGs and Bahrain Vision 2030. Cattegory Metric Calculation Corresponding GRI Corresponding Comments Standards SDGs E1. GHG Emissions E1.1) Total amount, in CO2 GRI 305: Emissions 2016 Report on actual atmospheric equivalents, for Scope 1 (if emissions produced as a direct applicable) result of the company’s energy E1.2) Total amount, in CO2 consumption. equivalents, for Scope 2 (if applicable) E1.3) Total amount, in CO2 equivalents, for Scope 3 (if applicable) E2. Emissions Intensity E2.1) Total GHG emissions GRI 305: Emissions 2016 Divide annual GHG emissions per output scaling factor by a relevant output (such as E2.2) Total non-GHG sales revenue or production emissions per output scaling size). factor E3. Energy Usage E3.1) Total amount of energy GRI 302: Energy 2016 Report on actual energy directly consumed consumption, usually reported E3.2) Total amount of energy in megawatt hours (MWh) or indirectly consumed gigajoules (GJ). E4. Energy Intensity Total direct energy usage per GRI 302: Energy 2016 Divide annual energy consumption output scaling factor by a relevant output (such as sales revenue or production size). 23 APPENDIX A: REPORTING ON ESG KEY PERFORMANCE INDICATORS – 32 KPIS Cattegory Metric Calculation Corresponding GRI Corresponding Comments Standards SDGs E5. Energy Mix Percentage: Energy usage GRI 302: Energy 2016 Specify which energy sources by generation type are most used by the company (solar, wind, hydropower, oil, gas, coal…etc. E6. Water Usage E6.1) Total amount of water GRI 303: Water and Effluents Report on annual amount of consumed 2018 water withdrawn, consumed, E6.2) Total amount of water recycled. reclaimed E7. Environmental E7.1) Does your company GRI 103: Management Publish a commitment such as Operations follow a formal Approach 2016* an environmental policy and Environmental Policy? apply international standards Yes/No such as ISO 14001 and ISO E7.2) Does your company 50001. follow specific waste, water, energy, and/or recycling polices? Yes/No E7.3) Does your company use a recognized energy management system? Yes/No E8. Environmental Does your Board/ GRI 102: General Disclosures Incorporate sustainability Oversight Management Team oversee 2016 issues at and/or manage management level through a climate-related risks? management committee. Yes/No E9. Environmental Does your Board/ Incorporate sustainability Oversight Management Team oversee issues at board level through a and/or manage other board committee. sustainability issues? Yes/No 24 APPENDIX A: REPORTING ON ESG KEY PERFORMANCE INDICATORS – 32 KPIS Cattegory Metric Calculation Corresponding GRI Corresponding Comments Standards SDGs E10. Climate Risk Total amount invested, Report on the amount invested Mitigation annually, in climate-related in climate-related issues (in infrastructure, resilience, and Bahraini Dinars), such as product development? research or product innovation. S1. CEO Pay Ratio S1.1) Ratio: CEO total GRI 102: General Disclose CEO salary (including compensation to median FTE Disclosures all bonus payments and total compensation 2016 inventives) as a ratio to a full S1.2) Does your company time employee salary, usually report this metric in expressed regulatory filings? Yes/No as “X:1” S2. Gender Pay Ratio Ratio: Median male GRI 405: Diversity Report the median total compensation to median and Equal compensation for men female compensation Opportunity 2016 compared to the median total compensation for women (as a ratio). S3. Employee Turnover S3.1) Percentage: GRI 401: Report on the total annual Year-over-year change for Employment 2016 turnover (whether voluntary or full-time employees involuntary). S3.2) Percentage: Year-over-year change for part-time employees S3.3) Percentage: Year-over-year change for contractors and/or consultants 25 APPENDIX A: REPORTING ON ESG KEY PERFORMANCE INDICATORS – 32 KPIS Cattegory Metric Calculation Corresponding GRI Corresponding Comments Standards SDGs S4. Gender Diversity S4.1) Percentage: Total GRI 102: General Report on the percentage of enterprise headcount held by Disclosures male-to-female employees, men and women 2016 broken down by various S4.2) Percentage: Entry- and GRI 405: Diversity organizational levels. mid-level positions held by and Equal men and women Opportunity 2016 S4.3) Percentage: Senior- GRI 405: Diversity and executive-level positions and Equal held by men and women Opportunity 2016 S5. Temporary Worker S5.1) Percentage: Total GRI 102: General Report on the percentage of Ratio enterprise headcount held by Disclosures full-time positions held by part-time employees 2016 non-traditional workers. S5.2) Percentage: Total enterprise headcount held by contractors and/or consultants S6. Non-Discrimination Does your company follow a GRI 103: Publish a non-discrimination sexual harassment and/or Management commitment such as a policy or non-discrimination policy? Approach 2016* statement. Yes/No S7. Injury Rate Percentage: Frequency of GRI 403: Report on the total number of injury events relative to total Occupational injuries and fatalities. workforce time Health and Safety 2018 S8. Global Health & Safety Does your company follow an GRI 103: Publish a health and safety occupational health and/or Management commitment such as a policy or global health & safety policy? Approach 2016* statement. Yes/No 26 APPENDIX A: REPORTING ON ESG KEY PERFORMANCE INDICATORS – 32 KPIS Cattegory Metric Calculation Corresponding GRI Corresponding Comments Standards SDGs S9. Child & S9.1) Does your company GRI 103: Publish a labor commitment Forced Labor follow a child and/or forced Management such a policy or a statement. labor policy? Yes/No Approach 2016* S9.2) If yes, does your child and/or forced labor policy also cover suppliers and vendors? Yes/No S10. Human S10.1) Does your company GRI 103: Publish a human rights Rights follow a human rights policy? Management commitment such as a policy or Yes/No Approach 2016* a statement. S10.2) If yes, does your human rights policy also cover suppliers and vendors? Yes/No S11. S11.1) Report on the number and Nationalization Percentage of national percentage of national employees employees. S11.2) Direct and indirect local job creation S12. Amount invested in the Report on the amount invested Community community, as a percentage in the community, as a percent- Investment of company revenues age of company revenues. G1. Board G1.1) Percentage: Total board GRI 405: Diversity Report on the amount and Diversity seats occupied by men and and Equal percentage of women in the women Opportunity 2016 board. G1.2) Percentage: Committee chairs occupied by men and women 27 APPENDIX A: REPORTING ON ESG KEY PERFORMANCE INDICATORS – 32 KPIS Cattegory Metric Calculation Corresponding GRI Corresponding Comments Standards SDGs G2. Board Independence G2.1) Does company GRI 102: General Highlight the separation of the prohibit CEO from serving Disclosures 2016 roles of chairman and CEO. as board chair? Yes/No Report on the number of G2.2) Percentage: Total independent board members. board seats occupied by independents G3. Incentivized Pay Are executives formally GRI 102: General Report on links between incentivized to perform on Disclosures 2016 executive sustainability? Yes/No performance on sustainability issues and pay. G4. Collective Bargaining Percentage: Total GRI 102: General Report on the total enterprise enterprise headcount Disclosures 2016 headcount covered by collective covered by collective bargaining agreement(s) bargaining agreement(s) G5. Supplier Code of G5.1) Are your vendors or GRI 102: General Disclosures Publish a commitment towards Conduct suppliers required to follow 2016 and for suppliers such as a code a Code of Conduct? Yes/ No GRI 103: of conduct, policy or statement. G5.2) If yes, what Management percentage of your Approach 2016* suppliers have formally certified their compliance with the code? G6. Ethics & G6.1) Does your company GRI 102: General Disclosures Publish an ethics and conduct Anti-Corruption follow an Ethics and/or 2016 commitment such as a code of Anti-Corruption policy? GRI 103: Management conduct, policy or statement. Yes/No Approach 2016* G6.2) If yes, what percentage of your workforce has formally certified its compliance with the policy? 28 APPENDIX A: REPORTING ON ESG KEY PERFORMANCE INDICATORS – 32 KPIS Cattegory Metric Calculation Corresponding GRI Corresponding Comments Standards SDGs G7. Data Privacy G7.1) Does your company GRI 103: Management Publish privacy commitment follow a Data Privacy policy? Approach 2016* such as a policy or statement. Yes/No G7.2) Has your company taken steps to comply with GDPR rules? Yes/No G8. Sustainability Reporting G8.1) Does your company Publish a standalone publish a sustainability sustainabiltiy report or integrate report? Yes/No sustainability information in G8.2) Is sustainability data annual or integrated report. included in your regulatory filings? Yes/No G9. Disclosure Practices G9.1) Does your company Align reporting with GRI, CDP, provide sustainability data SASB, IIRC, or UNGC. to sustainability reporting frameworks? Yes/No G9.2) Does your company focus on specific UN Sustainable Development Goals (SDGs)? Yes/No G9.3) Does your company set targets and report progress on the UN SDGs? Yes/No G10. External Assurance Are your sustainability GRI 102: General Disclosures Verify sustainability data by an disclosures assured or 2016 external third-party. validated by a third party? GRI 103: Management Yes/No Approach 2016 is to be used in combination with the topic specific Standards 29 ABOUT BAHRAIN BOURSE Who we are establishment, BHB has joined several regional and Bahrain Bourse is a self-regulated multi-asset international organizations such as Arab Federation of marketplace. Bahrain Bourse aims to offer to its Exchanges “AFE”, International Organization of investors, issuers, and intermediaries a comprehensive Securities Commissions “IOSCO”, World Federation of suite of exchange-related facilities including offering Exchanges "WFE", Africa & Middle East Depositories listing, trading, settlement, and depository services for Association "AMEDA", and Association of National various financial instruments. Numbering Agencies "ANNA", partner exchange member to the Sustainable Stock Exchanges “SSE” We aim to offer our stakeholders with the best Initiative, and Middle East Investor Relations investment and trading solutions, and pair it with Association – Bahrain Chapter “MEIRA”, which enables creative insights and problem-solving skills to provide Bahrain Bourse to bolster its position within the global our investors, issuers, and intermediaries with valuable capital markets. resources to meet their every expectation. Our key growth pillars underpins our way of conducting What we do business and how we interact with our stakeholders: Bahrain Bourse, as a Self-Regulated Organization (SRO) Origination, Innovation, Collaboration, and Pioneering and a front-line regulator, plays a key role in shaping Spirit, and all of them working together is what enables Bahrain’s capital markets. Bahrain Bourse provides a us to offer you with an "Oasis of Investment platform for the listing and trading of a various Opportunities". securities including Equities, Real Estate Investment Traded Funds (REITs), Government Bonds and Sukuks, Our history extends back to 1987, which marked the T-Bills, Mutual Funds, and Bahrain Investment Market. establishment of "Bahrain Stock Exchange (BSE)", the predecessor of "Bahrain Bourse (BHB)". Since then, Bahrain Stock Exchange has achieved milestone successes, largely attributed to the support of the Government of Kingdom of Bahrain and the collaboration provided by its stakeholders. In 2010, Bahrain Bourse was established in accordance with Law No. 60 for the year 2010 as a shareholding company to replace its predecessor Bahrain Stock Exchange. Bahrain Bourse is the sole entity in the Kingdom of Bahrain licensed by the Central Bank of Bahrain to act as a licensed exchange. Bahrain Clear, a fully-owned subsidiary of Bahrain Bourse, was established in June 2017 as a clearing P.O.Box 3203 Manama, Kingdom of Bahrain house with a disclosed capital of BD5 million, and a paid Tel: +973 17 261260 up capital of BD1 million. Bahrain Clear is licensed by Fax: +973 17 256362 Email: mbsd.info@bahrainbourse.com the Central Bank of Bahrain and offers pre and post Web: www.bahrainbourse.com trade services to investors as well as a range of Follow us on: services including transactions depository, clearing, settlement, central registry and registration. Since its 30