Jordan’s ESG Goals and its Impact on the Region’s Vision and Strategy 2025

ESG Goals, Net Zero Emissions, ESG Strategy & Development, ESG Compliance & Reporting, Sustainable Investment

  • Published Date: Jan, 2024
  • Report ID: Astra-300107
  • Format: Electronic (PDF)
  • Number of Pages: 70

The relevance of Environmental, Social, and Governance (ESG) in Jordan comes from its ‘National Vision and Strategy 2025’ that encompasses a wide range of objectives under each of its four core pillars, focusing on effective economic growth, skill enhancement, social progress, and environmental responsibility. There are four core pillars to the vision--to foster active citizens with a sense of belonging, create a safe and stable society, develop a global and dynamically competitive private sector, and develop an effective and efficient government.

Like other countries in the Gulf Cooperation Council (GCC), Jordan’s Vision is to achieve several objectives under socio-economic development by 2025. This is an extensive and forward-thinking developmental strategy that integrates ESG elements and provides the roadmap for Jordan’s transition towards a sustainable economy. Also, a 2021 research study says - across companies in Jordan, it was found that ESG disclosure is gradually increasing among public firms due to stakeholder pressure in the region.

On the one hand, the country primarily focuses on the ‘environment’ with targets to promote green growth and mitigate climate change; on the other hand, the nation’s focus could have been equally focused on the ‘social’ and ‘governance’ front as well. Jordan targets achieving net-zero emissions by 2060 and looks to promote energy efficiency measures to achieve certain objectives under its vision & strategy.

In addition, there are certain objectives aligning with ESG goals that include increasing the percentage of renewable energy in the nation’s energy mix and improving the biodiversity and ecosystem in the region. However, the country has very few absolute targets focused on improving social and governance factors in the region, one of which is to improve the proportion of women in the workforce. All these aspects are discussed further in this article.

ESG Momentum in Jordan:

Jordan’s environmental initiatives under its National Energy Strategy focus on reducing the adverse impact of climate change. As a part of Jordan’s 2020-2030 National Energy Strategy, the country aims to reduce its carbon emissions by 10% by 2030 and increase the share of renewable energy in its energy mix from 11% in 2020 to 14% in 2030 (supported by the Renewable Energy and Energy Efficiency Law 2012).

To further promote the adoption of renewable energy, the country has a Jordan Renewable Energy and Energy Efficiency Fund (JREEEF) that provides equity financing, direct grants, and credit structure to Small and Medium Enterprises (SMEs) and public entities. According to the U.S. International Trade Administration’s report, 2022, more than 20% of Jordan’s electricity grid is powered by renewable sources (solar power or windmills). Furthermore, the country targets to power 31% electricity grid in the country using renewable sources by 2030. Overall, Jordan’s progress towards improving environmental sustainability in the country has been fair, considering its renewable energy commitments.

  • Efforts towards promoting the ‘E’ in the ESG

In further attempts to reduce its impact on climate change, the country has integrated climate change within its Green Growth National Action Plan (2021-2025), which includes key environmental dimensions such as GHG avoidance along with reduction and protection of biodiversity and ecosystems. This includes investment actions and priority policies for the agricultural, waste and water, energy, transport, and tourism sectors. To protect biodiversity, the country has a target toincrease its forest area by 939,300 acres by 2025. In terms of water resources management, the country has initiated the National Conveyance Project with a budget of USD 2.9 billion to provide 300 million cubic meters of desalinated water from the Gulf of Aqaba to Amman per year.  This project is also intended to harness the long-term potential of Jordan as a producer of conventional and renewable energy sources.

  • Initiatives and efforts driving social impact

Jordan’s vision is driven by a commitment to reshape society by fostering principles of fairness, compassion, and equity and providing equal opportunities for all, regardless of gender. As a means of improving social outcomes, the country provides equally inclusive opportunities in terms of access to healthcare within the country.

According to a recent report by the International Travel & Health Insurance Journal, 2020, Jordan allocated around nine percent of its GDP to improve the healthcare sector to provide cross-border treatment to patients with high-quality care. This is one of the reasons for patients to choose Jordan as a top destination for healthcare, followed by the lower cost of treatment that the country offers compared to other countries in the GCC.

The country is also focusing on improving Diversity, Equality, and Inclusion (DEI) within the education sector. According to the United Nations report 2023, by 2025, the Government of Jordan plans to make preservice and in-service teacher training mandatory to improve the quality of education in the country. This will include professional development for teachers, with a particular emphasis on promoting inclusive and diverse education, specifically addressing the needs of children with disabilities. The goal is to ensure that all students, including those with disabilities, receive the support they need in the classroom and are not left behind. This creates an inclusive education system and helps them achieve core components of the “S” in ESG.

Challenges for Jordan in achieving its Vision 2025 and areas of improvement in ESG:

As a comprehensive development plan with ambitious goals, Jordan's Vision 2025 has been aided chiefly by environmental and social initiatives to improve sustainability in the country. However, compared to other regions in the GCC, Jordan needs more focus on governance initiatives or practices institutionalized in the country. As per 2022 research conducted across Jordanian Islamic banks to study the impact of ESG on their strategic success, it was found that governance factors had a higher impact on maximizing the efficiency and success of firms, more than social and environmental factors. Hence, focusing on governance strategies may help improve transparency, leadership, and accountability for companies in the region.

  • A lack of awareness of ESG disclosure

ESG disclosure has not been as comprehensive in Jordan as compared to international disclosure standards so far. Lack of awareness of ESG practices can be the primary reason, as a 2022 report by the International Finance Corporation (IFC) shows that Jordanian companies, on average, lack awareness and adoption of ESG disclosure practices. Also, on the other hand, IFC’s research shows that listed companies (specifically in the financial sector) have a higher adoption rate of ESG disclosure practices compared to SMEs and private companies.

In another research concerning the voluntary ESG information disclosure among listed firms in Jordan in 2021, it was found that voluntary disclosure on ESG is weak among firms listed on the Amman Stock Exchange and is evolving in response to stakeholder pressure. However, the study finds that governance factors, such as board composition, non-executive directors on the board, and the importance of the audit committee, had only little influence on improving the ESG disclosure, while board meetings and board size had a significant positive influence. Therefore, while the momentum of ESG disclosure is gradually increasing, the region requires improved awareness of ESG disclosure and ESG performance.

  • Social challenges

In terms of the social component of the ESG, social instability due to wars in Syria & Iraq resulted in trade disturbances, increased security expenses, and a lack of control of public expenditures, which increased the outstanding debt of the country. Besides, the high unemployment rate in the economy is a concern. The unemployment rate has decreased only by around 1.5% across a three-year period. In June 2023, the unemployment rate was 22.3%, compared to what it was in July 2020 (23.9%). In terms of equal representation of gender in the workforce, a 2022 article by The Jordan Times indicates that female participation in the kingdom was just 14.3% (as of 2022), far from the 27% target that the region has set to reach by 2025.

It is important for the region to take steps to decrease the employment gap and create employment opportunities for women. From an environmental perspective, the adoption of financial market innovations, such as green bonds, has been quite slow in Jordan. Jordan exempts custom duties and sales tax to produce renewable energy equipment; however, they do not have explicit financial incentives to help firms scale up green financing.

Overall, from a policy standpoint, addressing these ESG challenges will depend on Jordan’s policymaking efficacy and its ability to revamp its foreign aid strategy, which must be inclusive and committed to social reforms. Meanwhile, in terms of the ESG perspective, to combat social challenges and achieve the objectives established under the pillars of its national vision, the country needs to focus on ESG training and awareness, ESG disclosure, improving regulations, creating sustainable employment opportunities, and institutionalizing effective governance strategies within firms.

What can Astra ESG solutions offer?

Astra ESG solutions can offer extensive support through ESG reporting to tackle Jordan's environmental, social, and governance challenges as outlined in its 'National Vision and Strategy 2025'. Astra can formulate a strategic plan for Jordanian companies, placing a significant emphasis on environmental considerations while giving equal importance to social and governance contributions. This approach aims to enhance companies' performance in areas such as employment generation, diversity, equity, and inclusion (DEI), and fostering awareness about the significance of ESG practices. Astra can concentrate on enhancing ESG awareness and disclosure practices by conducting training sessions that promote ESG-friendly policies and contribute to the creation of sustainable employment opportunities. Through a diverse range of services, Astra is poised to play a crucial role in supporting Jordan's journey towards a more sustainable and inclusive economy.

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