A reflection of best practices in investor relations in Saudi Arabia over the past 15 years

A reflection of best practices in investor relations in Saudi Arabia over the past 15 years

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The listing of Saudi Arabian Oil Co. in 2019 was a historic moment for Saudi Arabia and became the catalyst for an acceleration of activity in the Kingdom’s capital markets.
The world’s largest initial public offering valued the company at $1.87 trillion on its first day of trading, thrusting the Saudi Stock Exchange into the global spotlight and boosting interest in the region’s largest exchange due its growing size, liquidity and favorable environment.
In hindsight, this milestone would not have been possible without the crucial regulatory and attitudinal changes set in motion by the Saudi Vision 2030.
Launched in 2016, Vision 2030 aims to increase development tenfold while reducing the Kingdom’s dependence on oil, diversifying its economy, developing public sector services and attracting global talent and investment.

A key pillar of Vision 2030 is the Financial Sector Development Program, put in place to enable an efficient financial sector that supports the development of the national economy. The ambitions of the program include increasing the participation of foreign investors and encouraging more companies to list on the Saudi Stock Exchange by developing promising new sectors.

Measures to mobilize relations with Saudi investors
With this increased level of activity, attention has naturally turned to the role of investor relations and what constitutes best practice.

While the Saudi Stock Exchange began conducting education campaigns on the value of investor relations as early as 2010, the mindset of several companies remained one of merely complying with regulations, with limited interest in apply additional measures to improve disclosures or engage meaningfully with the market.

However, the status quo is rapidly changing, driven by the demands of an increasingly sophisticated investor base calling for improved quality and quantity of disclosures.

While the process of change has met with some resistance, several ambitious companies are driving a change in their corporate culture and seizing opportunities to maximize and promote their investment story by embracing the best practices in investor relations.

Naturally, as companies realize how effective market communications can be for success, they also face a shortage of skilled investor relations officers. As a result, there is a high demand for these rare talents in the Saudi market, especially among those who combine financial knowledge with effective communication skills.

The industry is mobilizing to deal with the situation, with the Saudi chapter of the Middle East Investor Relations Association partnering with the Saudi Stock Exchange to roll out training and certification programs for prospective Saudi IROs.

In the short term, budding and currently listed companies will need to balance internal and external resources to develop an effective investor relations function that meets the immediate needs of key stakeholders while fulfilling their responsibility to advance local talent.

The challenges and opportunities posed by ESG

Beyond governance, an additional opportunity is also emerging for regional listed companies as ESG moves to the forefront of stakeholders’ agendas.

The Kingdom is taking steps to ensure it is at the forefront of global environmental and social standards, including the launch of the Saudi Green Initiative, which pledges to reduce carbon emissions by 278 million tons per year. year by 2030 and achieve net zero emissions by 2060.

The Saudi Exchange is already a member of the UN-sponsored Sustainable Exchanges initiative and has issued ESG disclosure and awareness guidelines to support listed companies.

There is no doubt that the increase in the market capitalization of the Saudi Stock Exchange to over SR10 trillion ($2.66 trillion) and the significant increase in the number of qualified foreign investors since the entry into force of the new regulations in 2018 prove that considerable progress has been made.

Moreover, it also pushes regulators to keep taking pioneering steps to ensure continued progress.

Investor relations has also come a long way in the past 15 years, but it is still a journey towards best practices. Along with the rapid growth of financial markets, boards across the region are realizing the importance of investor relations to preserve value. With the added pressure of ESG, adaptability to change and using the right resources will cement Saudi Arabia’s position as a global financial leader and destination of choice for emerging market investments.

• Abdullah Al-Suweilmy is Senior Advisor, Capital Markets and Investor Relations, Saudi Arabia.

Disclaimer: The opinions expressed by the authors in this section are their own and do not necessarily reflect the views of Arab News

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