Saudi's FII Institute unveils new ESG framework at London summit

Riyadh: Saudi Arabia's The Future Investment Initiative (FII) Institute hosted a London summit, "ESG in Emerging Markets", involving world leaders, global CEOs, international investors, thought leaders and heads of sustainability. The summit unveiled a new Inclusive ESG™ Framework and Scoring Methodology to inform and accelerate ESG investments in emerging economies. It launched an ESG White Paper calling on investors, governments and companies in emerging markets to raise their game, and it announced an investment of €500,000 in Timbeter, a leading green tech company.

The new Inclusive ESG™ Framework and Scoring Methodology aims to give unbiased ratings for companies in emerging markets who currently receive less than 10% of ESG flows, despite being home to nearly 90% of the world's population and roughly half of global GDP. ESG rating agencies are one of the main barriers to increasing investment in emerging markets (EMs). Currently, mainstream rating agencies employ KPIs not relevant to EMs. The existing frameworks focus too much on disclosure and ignore year-over-year performance improvement. The new framework, developed with the support of Ernst & Young (EY), values performance improvement over time more than the breadth of disclosure, emphasising sectoral challenges rather than country risks to ensure fair competition between companies in both emerging markets and developed markets.

The FII Institute is putting its money where its mouth is by investing €500,000 in Timbeter, a leading green tech company specialising in timber measurement. To increase supply chain transparency, sustainability and certification, in line with ESG processes, Timbeter provides an AI-driven photo-optics application that accurately determines the quantities of logs in an area with precise length and diameter. This technology is key to more proactive management of forests and a more sustainable sector.

The ESG White Paper is designed to encourage greater ESG investment in emerging markets. It calls on investors to publicly commit to raising the portion of capital allocated to emerging markets (EMs) from less than 10% today to a minimum of 30% of committed and invested capital by 2030.

The white paper urges governments to encourage emerging markets-headquartered companies to become more proactive at disclosing relevant information through their normal reporting channels. It also encourages companies headquartered in emerging markets to strengthen their narrative explanation for how ESG actions align with local realities and drive enhanced value for all stakeholders, including risk management for investors.

Richard Attias, CEO of the FII Institute, said, "Central to our work at FII Institute is to increase awareness about the weaknesses in current ESG standards and their impact on global sustainability prospects and to advocate for an inclusive and equitable application of ESG through driving real action by key players globally.

"ESG has been one of the fastest-growing investment strategies over the past few years, accounting for one-third of all assets under management. But this growth is not even. Working with our partners at EY, we identified and removed the barriers to ESG investment in emerging markets, which are often overlooked. By launching the Inclusive™ ESG Framework and Scoring Methodology, investing in a global sustainable solutions company, and publishing our recent ESG white paper – we are making tangible actions to create a better future for humanity. And we are confident that our partners around the world will help us drive those actions further."

The "ESG in Emerging Markets" summit featured more than 40 international leaders and experts who provided their insights on the future of ESG and the future of sustainability.