By Mohamed Ahmed
The results of a survey conducted by Daily News Egypt indicated that sustainable development is almost nonexistent among the priorities of investors and parties of the capital market.
The survey coincides with the Egyptian Stock Exchange (EGX) administration holding the First Conference on Sustainable Development, on Sunday.
The survey covered a random sample of effective investment parties in the capital market, including asset and brokerage firm managers, in addition to financial analysts who advise investors.
The results revealed that 87.5% of the survey sample does not know of the existence of the EGX index S&P/EGX ESG addressing sustainable development. More interestingly, a member in the Indexes Committee at the EGX was unaware of the index.
100% of the sample does not know the criteria of choosing stocks for the index, and does not rely on it in deciding the strategies of investing in stocks.
Moreover, 100% of the sample does not see any relation between the sustainable development and the profits margins the stocks achieve. However, 37.5% asserted that sustainable development, especially the governance factor, affects the risk margin.
Member of the Indexes Committee at the EGX and the CEO of Prime Holding, Mohamed Maher, said he does not know of the S&P/EGX ESG index that addresses sustainable development, and consequently he does not know the methodology of forming the index.
Explaining why he does not know the index, Maher said the EGX did not promote the index among the indexes available in the market.
He noted that he does not rely on the index as one of the tools while deciding the strategies for investing in stocks, as there are more effective indexes in the market, whether the major indexes of the EGX, or the indexes measuring the stocks’ performance in terms of profitability.
Maher explained that there is no link between sustainability and the stocks’ profitability; rather developed markets care about sustainability due to its positive impact on society.
However, sustainability has a relative impact on the risk factor of the stocks, based on the governance factor, which plays a major role in transparency and the separation of ownership and management.
Moreover, Essam Khalifa, Chairman and Managing Director of the National Fund Management Co., said he does not know anything about the S&P/EGX ESG index or its main components, and the ways they are calculated.
He added that the sustainability of the companies traded in the EGX is not one of the factors affecting the decisions for a strategy for managing investment funds or the stocks portfolios. Rather, they mainly depend on profitability factors, financial performance, and the companies’ financial commitment.
Additionally, Hazem Kamel, Managing Director of NAEEM Financial Investments (NFI)-Asset Management, was also unaware of the S&P/EGX ESG index, because the index was not promoted well among the market’s parties, and due to its low importance for investors.
He asserted that he does not depend on the index or sustainable development in planning the investment strategies.
As for financial analysts, Karim Khadr, Head of Institutional Equities at CI Capital, said he is not aware of the S&P/EGX ESG index, or its components.
Khadr said sustainable development measures in general do not affect plans for investing in stocks. Moreover, they do not have an impact on the stocks’ profit margin; even the budgets allocated for the activities of corporate social responsibility do not affect the profitability factor.
However, Khadr believes that the governance factor, which is one of the index’s components, relatively affects the risks margin for investment, pointing to the example of Telecom Egypt, when a board was chosen to implement the policies of the Ministry of Communications, rather than an investment strategy that suits the company.
Managing Director of the brokerage sector at Cairo Financial Holding, Ahmed Abu Hussein, said the S&P/EGX ESG is one of the indexes most committed to sustainable development.
Abu Hussein noted that he is not very familiar with the index’s approach in terms of choosing stocks. Moreover, it is not relied on in terms of building strategies or providing investment recommendations to customers.
Mohamed Fathallah, the Managing Director of Al-Tawfeek Financial Brokerage, also said he has no knowledge of stock exchange index S&P/EGX ESG or the methodology of its formation, as it was not promoted by the EGX management.
He explained that he does not pay attention to sustainability standards in terms of providing investment recommendations to traders, because the market is full of issues and problems that have a larger effect on the performance of stocks, such as liquidity factors, the dollar crisis, the economic performance, or the lack of transparency in the capital market.
Fathallah expressed doubts that there is a relation between profit margins or investment risks with stocks and sustainable development standards.
Result of the survey:
| Relatively | Yes | No | Questions |
| 0% | 12.5% | 87.5% | Do you know the index S&P/ EGX ESG for Sustainable Development? |
| 0% | 0% | 100% | Do you know the stocks selection criteria for the index? |
| 0% | 0% | 100% | Do you rely on the index in the purchase and sale of shares? |
| 0% | 0% | 100% | Does sustainable development standards affect the margins of profitability? |
| 37.5% | 0% | 62.5% | Does sustainable development standards affect the margins of risk? |
