Cyprus Stock Exchange encourages companies to adopt ESG policies

She further explained that adherence to corporate governance rules aids in achieving operational goals and the vision of a company, ultimately serving the long-term interests of all shareholders.

“At the same time, investors increasingly expect companies and organisations to follow corporate social responsibility policies and contribute positively to the society in which they operate, thereby enhancing the values of each community,” she noted.

Corporate governance, according to Stasopoulou, encompasses a set of rules applied to companies as dynamic entities to regulate various matters aimed at increasing their value and protecting their interests.

These rules establish systems for monitoring and assessing corporate risks and ensure transparency in decision-making processes by the company’s management.

Among the issues regulated by corporate governance are the composition of the board of directors, nomination committees, director compensation, accountability, and auditing.

“Empirical studies have shown that companies that have adopted and implemented corporate governance practices effectively have lower capital costs and increased value, reflected in their stock prices,” Stasopoulou said.

Furthermore, Corporate Social Responsibility (CSR) has become increasingly crucial for companies, given the growing challenges faced by economies and societies.

“Companies are now expected to adapt to remain competitive while also being ethical and legal,” the CSE office said.

“Today, corporate obligations to follow and implement CSR policies are commendable behaviours, as their actions reinforce the goals and values of the society in which they operate,” she added.

Moreover, she noted that CSR is now a paramount factor, as companies are called upon to contribute more to the quality of life of society as a whole, and assume responsibilities towards society by adopting a wide range of human values.

“The combination of Environment, Society, and Governance, or ESG, has become more pressing, and companies are expected to act responsibly for the benefit of society,” Stasopoulou said.

“Actions within these frameworks serve as a guarantee for investors of the proper functioning of each company and appear to add value to their securities,” she added.

Some of the issues possibly covered by the above section include pollution emissions, waste management, ethical operational methods, equal opportunities in employment, and community involvement.

Stasopoulou explained that “many times, corporate actions have negative impacts on environmental protection, social justice, and workers’ rights“.

“It has also been proven that companies may improve their environmental practices but continue to display irresponsible treatment towards their employees, resulting in the benefits of social responsibility actions being negated,” she stated.

What is more, she noted that for many investors, ESG aspects are of significant importance as they indicate how a company operates and how its actions serve the environment, employees, community, customers, and shareholders.

“Companies are continually evaluated by citizens based on the social, environmental, and economic impact of their actions,” she said.

She also mentioned that for more detailed information on the subject, there is also EU Directive 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, concerning the submission of sustainability reports by companies.

“The Cyprus Stock Exchange, through the corporate governance code it has prepared, which has been applied by most listed companies here for years, has added a special provision urging companies to incorporate environmental, social, and governance issues into their actions, demonstrating their stance on the societal and environmental issues of the society in which they operate,” Stasopoulou concluded.