Efforts of EGX in Promoting Sustainability in The Capital Market EGX Sustainability Conference Session two: Sustainability In The Egyptian Capital Market Medhat Nafei, PhD. General Manager, Risk Management, EGX 25th of October 2015.

Contents Introduction. EGX Efforts to Promote Sustainability ROSC Report S&P/EGX ESG Index Sustainable Stock Exchanges (SSE) Initiative : Sustainability in EGX Strategy. The Sustainability working Group (SWG)-WFE: 2015 Sustainability Year: Future Prospective on Sustainability:

Introduction EGX main goal related to sustainability is raising awareness and promoting the Concepts of Corporate Governance, Corporate Social Responsibility and Responsibility towards surrounding environment between listed companies, investor and other stakeholders, in addition to participate in enhancing and developing the ESG concept between stock exchanges regionally and worldwide. EGX encourage listed companies to move from doing charitable activities to focus on building their corporate image and being able to manage ESG related-risks. Therefore, the company’s Corporate Social Responsibility (CSR) strategy not only helps the company improve its reputation but also becomes part of the overall risk management

EGX Efforts to Promote Sustainability 2004 2010 2012 2013 2014 2015 EGX embedded sustainability into its strategy 2nd ROSC report SWG-WFE UN- SSE Initiative S&P/EGX ESG Index Model for SSE Communication to Stockholder. Ringing the bell for Gender equality, March. SSE Model Guidance on Reporting ESG Information to Investors, launched 8th of Sep.

EGX Efforts to Promote Sustainability 2004 2010 2012 2013 2014 2015 EGX Participated in The Second (ROSC) The Egyptian Exchange (EGX) realized the rationale for corporate sustainability since 2004, when EGX participated in the second Report on the Observance of Standards and Codes (ROSC), and started to implement new listing, delisting and disclosure rules (On Going Process), focusing on the concept of transparency & corporate governance, These include The disclosure requirements (financial reporting, corporate actions, material events, shareholding structure, BOD and General meetings) The obligation of having an independent audit committee Some of the rules pertinent to related party transactions and conflict of interest.

EGX Efforts to Promote Sustainability 2004 2010 2012 2013 2014 2015 S&P/EGX ESG Index In March 2010, EGX was the 1st stock market in the MENA region and 2nd worldwide to launch the sustainability index S&P/EGX ESG index, in cooperation with Standard and Poor's (S&P) and The Egyptian Institute of Directors (EIoD). ESG Index encourages companies to be more transparent and to disclose their governance, social and environmental practices more clearly to benefit their means and to increase their market value. ESG Index is targeting investors much interested in investing their money in more advocated companies to sustainable environmental, social and governance performance. The index includes the highest 30 stocks performing in ESG aspects, from the pool of 100 Egyptian companies screened annually, and uses an innovative score- weighting scheme.

EGX Efforts to Promote Sustainability 2004 2010 2012 2013 2014 2015 Sustainable Stock Exchanges (SSE) Initiative : EGX is an active member of The Sustainability Stock Exchange Initiative (SSE) since 2012. EGX with other 4 stock exchanges (Nasdaq, Johannesburg, Ibovespa and Borsa Istanbul) participated in making a public commitment to sustainability in their markets, thereby becoming a SSE Partner Exchange. Now the SSE initiative consists of 27 members. EGX participated in all meetings and conference calls. EGX Participated in regular Questionnaires/ Survey.

EGX Efforts to Promote Sustainability 2004 2010 2012 2013 2014 2015 Sustainability in EGX Strategy: EGX is working on raising the importance of the Concept of Corporate Social Responsibility in its Strategy for 2013-2017, through focusing on encouraging the listed companies to commit more to the social responsibility concept. This can take place through disseminating the corporate social responsibility concept and promote establishing a social responsibility fund where the listed companies can participate in which will be supported by EGX and Market Regulator.

EGX Efforts to Promote Sustainability 2004 2010 2012 2013 2014 2015 The Sustainability working Group (SWG)-WFE: EGX is an active member in The Sustainability working Group (SWG), Since March 2014. The SWG is one of the World Federation of Exchanges (WFE) working groups. SWG is comprised of representatives from a diverse array of global stock exchanges with a mandate to build consensus on the purpose, practicality, and materiality of Environmental, Social, and Governance (ESG) data. EGX participates in the annual survey of SWG. EGX participates in SWG Report on ESG initiatives by Exchanges Worldwide.

EGX Efforts to Promote Sustainability 2004 2010 2012 2013 2014 2015 2015 Sustainability Year: In late Dec 2014, EGX announced that 2015 will be EGX Sustainability year. EGX joined the “SSE Model Guidance Advisory Group”, the group is consisted of 56 members from 21 countries. The SSE Model Guidance aimed to assist both exchanges and companies with ESG reporting and related issues. Jan 2015, EGX acknowledged for pioneer issuing of the “Communication to stakeholder” as a model for other SSE initiative members. March 2015; EGX celebrated UN Women Bell Ringing Event, “Ringing the Bell for Gender Equality”. Sep 2015: EGX acknowledged for being part of advisory group, in the launching of “Model Guidance on Reporting ESG Information to Investors: A voluntary tool for stock exchanges to guide issuers”.

Future Prospective on Sustainability In March 2016: EGX is committed to participate in the UN Women Bell Ringing Event, “Ringing the Bell for Gender Equality”. EGX is inviting listed companies to achieve more gender equality, as the number of Females on Board of Directors for listed companies (as of September 2015), is only 161 (Representing only 7.2% of total number of BOD members) By the end of 2016: EGX is committed to create a voluntary guidance for companies on reporting ESG information. 

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S&P/EGX ESG Index Score-weighting Annual Rebalance for the top 100 actively traded companies, includes: Phase 1 Quantitative Assessment of the companies based on public information and application of Transparency and Disclosure (T&D) methodology (Questionnaire with 197 Question) Phase 2 Qualitative Assessment (Negative News Analysis) based on info that is available in the public domain – say in media, websites and/or other reports. Final Score Composite Score based on both quantitative and qualitative assessments.

S&P/EGX ESG Index Score-weighting Phase (1) Quantitative Assessment: T&D Template for Assessing ESG includes the disclosure of; Governance (G): Shareholder Capital Shareholder Rights Financial Information Operational Information Board and Management Information Board and management remuneration Business Ethics and Corporate Responsibility. Corporate Governance. Environment and Social (ES): Environmental Pollution Natural Resources Use Employee Relations/Job Creation Labor Rights Employee Health & Safety (H&S) Equal Opportunity Community : Human Rights Community Investment Customer Outreach and Product Quality. Shareholder Capital The number and identity of shareholders each holding more than 10%. Shareholding in the company by individual senior managers. Shareholding in the company by individual directors Community Investment Explicit policy/statement regarding community investment Initiatives on community awareness or education Company participation in public-private initiatives for community development . Description/Amount of total contributions/donations to charitable initiatives (health, education etc)

S&P/EGX ESG Index Score-weighting Phase (2) Qualitative Assessment: The negative news analysis for ESG includes, reaching media for; Governance (G): Ownership Structure and Shareholder Rights. Transparency, Disclosure and Audit . Board Structure and Effectiveness Business Ethics and Corporate Responsibility. Environment and Social (ES): Environmental Pollution Natural Resources Use Employee Relations Labor Rights Employee Health & Safety (H&S) Equal Opportunity Community: Human Rights Product Safety and Quality Ownership Structure and Shareholder Rights. Clear evidence that a significant related party transaction or other corporate action occurred without prior notification or consent of minority shareholders. Environmental Pollution Paid substantial fines/penalties/settlements related to environmental pollution (to air, land and/or water),

S&P/EGX ESG Index Score-weighting Performance of S&P/EGX ESG Index In 2012, S&P/EGX ESG index ranked 1st worldwide with total return of 54.8% while EGX 30 ranked third with 50.8%. Back   EGX30 EGX70 EGX100 S&P 2014 31.6% 4.2% 18.1% 40.6%