Methodology

    ESG Invest ESG Ratings Methodology

    A transparent and consistent framework for evaluating corporate sustainability across 880+ Middle East listed companies.

    1

    Introduction

    ESG Invest provides environmental, social, and governance (ESG) ratings designed to help investors evaluate sustainability risks, corporate practices, and long-term resilience of publicly listed companies across Middle East markets.

    The ESG Invest methodology assesses companies using a structured framework that evaluates environmental management, social responsibility, and governance quality based on publicly available information. The objective is to provide a transparent and consistent analytical view of corporate sustainability performance that can support investment analysis and benchmarking.

    ESG ratings produced by ESG Invest are analytical opinions based on available information and do not constitute investment advice or financial recommendations.

    2

    Coverage

    The ESG Invest rating universe includes publicly listed companies across major Middle East capital markets.

    • Saudi Arabia
    • United Arab Emirates
    • Qatar
    • Kuwait
    • Oman
    • Bahrain
    • Jordan
    • Palestine
    • Lebanon

    The ESG Invest database currently covers more than 880 listed companies across these markets. Coverage is expanded periodically as disclosure improves and new companies become listed.

    Companies are selected for coverage based on factors including market relevance, liquidity, and availability of publicly disclosed ESG information.

    3

    ESG Rating Framework

    The ESG Invest methodology evaluates companies across three core pillars:

    • Environmental
    • Social
    • Governance

    Each pillar captures a range of sustainability topics reflecting the risks and management practices relevant to corporate operations.

    The framework incorporates 43 ESG criteria, which are customized by sector to reflect the sustainability challenges most relevant to each industry.

    4

    Environmental Assessment

    The Environmental pillar evaluates how companies manage environmental impacts and natural resource use.

    Key environmental topics assessed include:

    • Climate Strategy and Greenhouse Gas Emissions
    • Energy Consumption and Energy Efficiency
    • Water Management Practices
    • Waste Management and Pollution Control
    • Environmental Policies and Management Systems
    • Environmental Targets and Performance Monitoring
    • Environmental Disclosure and Transparency

    The relevance of these indicators varies across sectors depending on environmental risk exposure.

    5

    Social Assessment

    The Social pillar evaluates how companies manage relationships with employees, customers, suppliers, and communities.

    Key social topics assessed include:

    • Workforce Management and Employee Wellbeing
    • Occupational Health and Safety
    • Diversity and Inclusion
    • Employee Development and Training
    • Labor Practices and Human Rights Policies
    • Customer Responsibility and Product Safety
    • Supply Chain Responsibility
    • Community Engagement and Social Impact

    These indicators help assess the quality of corporate social responsibility practices and workforce management.

    6

    Governance Assessment

    The Governance pillar evaluates the effectiveness of corporate governance structures and oversight mechanisms.

    Key governance topics assessed include:

    • Board Structure and Independence
    • Board Diversity and Expertise
    • Executive Compensation and Incentives
    • Shareholder Rights and Transparency
    • Business Ethics and Anti-Corruption Policies
    • Risk Management and Internal Controls
    • Disclosure and Reporting Practices

    Governance indicators focus on the mechanisms through which companies ensure accountability, transparency, and responsible decision-making.

    7

    Indicator Framework

    The ESG Invest methodology incorporates 43 ESG criteria distributed across the Environmental, Social, and Governance pillars.

    These criteria fall into several categories:

    • Policy Indicators evaluating the presence and quality of ESG policies
    • Management Indicators assessing systems and oversight mechanisms
    • Performance Indicators reflecting quantitative ESG performance metrics
    • Disclosure Indicators evaluating transparency and quality of public reporting

    Sector-specific adjustments are applied to ensure that the criteria reflect the most material ESG risks for each industry.

    8

    Sector Customization

    ESG risks vary significantly across industries. To address this, the ESG Invest methodology applies sector-specific weighting and relevance adjustments.

    Examples include:

    • Energy and Utilities companies are assessed more heavily on environmental and climate-related indicators
    • Financial Institutions receive greater emphasis on governance and risk management indicators
    • Industrial and Manufacturing companies are evaluated more closely on environmental impact and workplace safety

    Sector customization improves the relevance and comparability of ESG ratings across industries.

    9

    Data Sources

    ESG Invest ratings are primarily based on publicly available information to ensure transparency and replicability.

    Sources used in the assessment include:

    • Annual Reports and Financial Statements
    • Sustainability and ESG Reports
    • Corporate Governance Disclosures
    • Company Websites and Policy Documents
    • Regulatory Filings and Stock Exchange Disclosures
    • Public Sustainability Data and Performance Metrics

    Using publicly disclosed information ensures equal treatment of companies and transparency of the analytical process.

    10

    Scoring Methodology

    Each ESG criterion is evaluated based on the strength of policies, management systems, performance indicators, and disclosure practices.

    Individual criteria are scored and aggregated to produce pillar-level scores for:

    • Environmental Performance
    • Social Responsibility
    • Governance Quality

    The pillar scores are then combined to generate an overall ESG score ranging from 0 to 100.

    Higher scores indicate stronger ESG governance structures, more robust sustainability practices, and higher levels of transparency.

    11

    Treatment of Limited Disclosure

    In emerging markets, ESG disclosure practices vary significantly across companies.

    Where relevant ESG information is not publicly available, the ESG Invest methodology may assign lower scores to reflect disclosure gaps.

    This approach encourages improved transparency while maintaining comparability across companies.

    12

    Interpretation of ESG Scores

    ESG scores represent the relative strength of a company's sustainability practices and governance structures.

    Higher scores generally reflect:

    • Stronger ESG governance structures
    • More comprehensive sustainability policies
    • Evidence of ESG performance monitoring
    • Higher levels of transparency and disclosure

    Lower scores may indicate limited disclosure, weaker governance systems, or limited implementation of sustainability practices.

    13

    Rating Updates

    ESG ratings are updated periodically to reflect new corporate disclosures and developments.

    Updates may occur following:

    • Publication of Annual Reports
    • Release of Sustainability or ESG Reports
    • Significant Corporate Governance Changes
    • Major ESG Controversies or Events
    • New Regulatory Disclosures

    These updates ensure that ESG ratings remain aligned with the most recent publicly available information.

    14

    Quality Assurance

    ESG Invest applies internal review procedures to ensure consistency and analytical quality.

    Quality assurance processes include:

    • Internal analytical review of ratings
    • Validation of data sources
    • Consistency checks across companies and sectors
    • Periodic methodology reviews

    These processes support the reliability and credibility of ESG ratings.

    15

    Methodology Review

    The ESG Invest methodology is reviewed periodically to ensure alignment with evolving ESG standards, market practices, and regulatory expectations.

    Methodology updates may incorporate improvements in:

    • Indicator coverage
    • Sector relevance
    • Data availability
    • Analytical precision

    Material methodology changes are communicated to stakeholders.

    Disclaimer

    ESG Invest ratings represent analytical opinions regarding ESG performance based on publicly available information.

    They are provided for informational purposes only and do not constitute investment advice, financial recommendations, or credit ratings.

    Users of ESG Invest ratings should conduct their own analysis before making investment decisions.