Skip to main content

On Location: ESG Engagement in Turkey and Saudi Arabia

Posted on May 22, 2024

Matthew Gray
Matthew Gray
Associate Director, Stewardship
Jennifer Jew
Jennifer Jew
Associate, Stewardship
  • In-person meetings are a key engagement tool as they are a great way to develop trust with companies, helping to pave the way for future engagements. They can also help foster commitment in companies to drive meaningful change. 
  • Morningstar Sustainalytics’ Stewardship Team met with companies in Turkey and Saudi Arabia to learn about the ESG-related progress and challenges they face in the region and beyond.  
  • Today, Saudi Arabia and Turkey both reflect the emerging markets’ momentum towards increased government buy-in and corporate action around ESG matters. Both countries have committed to making ESG disclosures mandatory for large cap companies, with both using ISSB standards as the basis for primary disclosure requirements.  


In this interview, Stewardship Associate Jennifer Jew spoke with Morningstar Sustainalytics’ Associate Director of ESG risk in Eurasia’s emerging markets, Matthew Gray. He shared insights from his engagement trip to Turkey and Saudi Arabia earlier this year through Sustainalytics’ Material Risk Engagement. The conversation yielded insights on how companies are addressing environmental and social issues in their operations and how they are navigating the ever-changing environmental, social and governance (ESG) and climate reporting landscape. Matthew also shared his thoughts on the important role engagement trips play in investor stewardship activities.

Corporate Sustainability and Investor Interest in Emerging Markets

Jennifer Jew: Hi Matthew. Thanks for chatting with me. To start, please give the reader a bit of background. Why did you decide to visit Turkey and Saudi Arabia on this engagement trip? Why are our clients interested in companies from these countries?

Matthew Gray: The area is fascinating and highly important as it straddles East and West. Both countries are full of culture, history, and geological wonders. They are ones to watch for ESG development and growth, as they’re the largest emerging markets in the region and they’re growing. The Gulf and the Middle East region house companies that are interested in international partnerships and developing relationships, with Saudi Arabia and Turkey being the two countries with the highest GDP in the region. We have never been there before, so this trip enabled us to see and meet the companies face to face. 

In terms of material ESG issues for companies in these two countries, our clients are interested in three main topics: emissions, human capital, and business ethics as it relates to operating in an autocratic country. 

In my work, I engage with around 25 companies in Saudi Arabia and Turkey whose ESG risk range from medium, high, to severe.1 Sectors include regional banks, oil and gas producers, refiners and pipelines, and commodity chemicals, to name a few. One company I met with in the refiners and pipelines sector, I’ve engaged with through virtual meetings since February 2023. Though still in its early stages, our engagement objective is for the company to continue to address its carbon emissions, while increasing its downstream community engagement with rail and ports. So, going to the region and meeting representatives from this company helped to build a strong relationship, stimulate engagement and participation to ensure a positive outcome for our engagement objectives.

JJ: And why do you think investors are particularly interested in emerging market companies?

MG: Investors are interested in how emerging markets continue to grow and whether they’re doing so responsibly and sustainably in terms of ESG. But they’re also interested in nuances and going beyond the surface-level criticisms of some governments and media toward emerging market economies and regimes. We are seeing investor interest shift to India, the Gulf, and Southeast Asian nations. These emerging markets are receiving renewed attention, and the learning curve is more accelerated for investors than it was with China, where the growth story was two decades in the making. Therefore, there is a lot to learn about these new contexts, regulations, and policies, specifically with respect to their progress on social policies and pathways to a net zero transition. 

Investors are also interested in what companies are doing beyond their flagship projects. They’re interested in material issues like the company policies that will underpin growth; their engagement with talented youth; bringing women into the workforce; and their proximity to governments and the limited preferential treatment they may receive due to being viewed as “national champions.”

Photos provided by Matthew Gray.

ESG Challenges and Concerns for Companies

JJ: What were you hoping to gain from this trip and how will this support Material Risk Engagement clients?

MG: Our Material Risk Engagement aims to promote and protect the value of clients’ portfolio companies through collaborative and constructive engagement that helps companies better identify, understand, and manage ESG risks. 

So, with this trip our stewardship team aimed to build trust and expand our network so we can have wider and deeper engagements with these companies and more engagements with other companies in the future. We also wanted to provide investors with a more contextually driven understanding of the challenges facing these companies.

JJ: What did you learn from talking to companies? What challenges and opportunities related to ESG did they share?

MG: A common challenge among the companies I visited is their dependence on technology to solve their emissions problems. They are waiting for innovations outside of their operational capacity, such as hydrogen-based energy at scale or digitalization technology, to optimize supply chains. However, though they are optimistic that technology can help address some of their challenges, the technology just isn’t there yet. 

For instance, I visited one of Turkey’s largest supermarket chains which operates 9,000 supermarkets across the country and learned that it still used wall maps, paper and pens to manually determine the path of its fleet from its 49 warehouses. They had attempted to use AI to bring efficiencies and lower emissions but found that the technology lacked the real-time information they needed to run the fleet smoothly, such as driver awareness of local road conditions, weather patterns, and local traffic volumes. The technology couldn't calculate appropriately the most efficient routes, account for weather, current road conditions, fuel usage, etc. So, despite the potential to offer companies in the region opportunities to lower their emissions, technology isn’t always the silver bullet. 

JJ: Another concern for companies across jurisdictions is the introduction of ESG and climate-related reporting and disclosure requirements. Can you provide insights on the regulatory landscape in Turkey and Saudi Arabia and how companies are approaching reporting requirements at home and abroad?

MG: Today, Saudi Arabia and Turkey both reflect emerging markets’ ESG momentum towards increased government buy-in, as well as corporate action. Both countries are now committed to making ESG disclosures mandatory for large cap public and private companies, with both using International Sustainability Standards Board (ISSB) standards as the primary disclosure requirements, yet with their own local adjustments. Turkey’s reporting requirements will take effect in 2025, while Saudi Arabia is targeting 2027 or sooner. Both countries’ policy makers are leaning on committees, which are comprised of experts, as well as a few selected company representatives – many of which we are engaging with as a part of our ESG Risk Stewardship service.

The companies we met are driving ESG changes, having set relevant targets well ahead of government disclosure requirements (i.e., emissions reductions, localization of staffing, supply chain pre-screening requirements focused on digitalization, disclosures, and aligning to their own ESG policies). The mandated disclosures will come into effect in 2026 (or 2027) in Saudi and 2025 in Turkey for large market cap companies, which are both well ahead of all other markets in the region. Until then, companies have been pre-emptive with more focus on other international norms and frameworks instead of waiting for national disclosure requirements. Many of these top companies have in fact guided the upcoming disclosure policies within their countries, ensuring their interests were also aligned, while still meeting international standards for the most part.  

Benefits of Company Engagement Trips

JJ: With respect to company engagements and investor stewardship activities, why is it important for us to talk to companies in person? 

MG: Face-to-face visits are an important part of the work we do. Without them, there is a risk that companies’ ESG performance will be less exposed to the market, creating a blind spot for investors. In-person meetings are one of our main engagement tools, as they are a great way to develop trust with and foster commitment in companies to drive meaningful change. 

They provide tremendous benefits, as meeting with companies in person can make future engagements so much richer, can accelerate trust, and can strongly signal that we – Sustainalytics and investors – are committed and investing resources in visiting them. When you meet someone once, the next time you meet them they have a stronger reference point for the relationship. You can also develop more of an offline relationship in a less formal setting, which can allow you to breach more sensitive topics in the future, and in that region it’s very important. 

In an in-person meeting it is also much easier to have the full attention of stakeholders and this adds to collaboration and offers an opportunity to contribute where you might not have been able to virtually. 

These meetings also offer valuable opportunities to gain insights into companies’ risk management activities, which support clients’ investment decision-making.2 

JJ: In addition to in-person meetings, you also had an opportunity to see company operations up close. In your view, what’s the advantage of conducting site visits?

MG: When going to sites, one can see how ESG policies are put into action. On this trip in Turkey, I visited a warehouse of one of the country’s largest supermarkets, which has over 10,000 shops. I was given full access to the shop floor. I was also able to chat with employees who had been there over a decade and discuss all the changes over the past few years in terms of health and safety and automation. We also discussed their understanding of sustainability and how prevalent it has become in their operational meetings. 

On a previous engagement trip to India, we visited a coal-driven energy plant that provides all of New Delhi’s electricity to see first-hand the types of coal used and how the procurement team goes about selling the company’s excess ash to a cement factory. We also spent hours walking around the water treatment center, the nearby communities, and up the boiler towers to gain an understanding of the working conditions and the impacts on the communities since the plant opened. 

Not only are the site visits important, but so is visiting companies at their headquarters. It’s having the opportunity to read the room, note the cultural nuances of discussions, the manner in which they host you, or the extent of their preparations. In some cases, a company will also take the time to summon and introduce you to people from other departments which interest you or take you to their office on another floor – which could then lead to further insights well beyond the formalized meeting room or engagement. The unpredictable benefits are enlightening, if you avail yourself to them and make efforts to note the gestures.

Key Learnings for Sustainalytics’ Material Risk Engagement 

JJ: Sounds like overall the trip was a success and provided useful insights for investors. What would you say are the key takeaways?

MG: Indeed, all the engaged companies were eager to provide access to their risk teams, human resources, strategy, investor relations, finance and more, showing a level of transparency that signaled trust and confidence in our engagement. 

In terms of key takeaways, first, the companies I visited are all showing progress towards addressing their ESG issues. They are all on board, with most of them contributing to the development of new regulations and willingly ascribing to them. 

Second, they are concerned about generational technological jumps, financing, and the dependence on technology to prepare for “Industry 4.0” (i.e., adapting to the shift away from fossil fuels or using less water).3  

Third, Saudi Arabia is dependent on immigration, high caliber employees and the increasing capacity of women, whereas Turkey is concerned about a brain drain – two entirely different societal paradigms and calculus. 

Fourth, the larger companies are part of a very contained network; a much smaller network than we had anticipated. We’ve succeeded in establishing trust in those networks, which will hopefully lead to more engagements with more companies and deeper engagements going forward for the long term. Alas, that will be the fifth takeaway: seeds of trust have been established and eyes on the region are widening.

Want to learn more? Click the image below to watch Matthew's interview with Morningstar Sweden's Johanna Englundh.

Johanna Englundh and Matthew Gray side-by-side


Learn More About Material Risk Engagement 

Material Risk Engagement is part of Sustainalytics' Engagement 360 — an integrative stewardship solution that combines all of Sustainalytics’ engagement programs in one bundle. This service offers institutional investors a comprehensive approach to address systemic risks and underlying ESG issues in their portfolios. In Material Risk Engagement, one of the clearest connections between engagement and change is illustrated by the positive developments measure defined as initiatives taken by the companies that are associated with the suggested actions we have provided to the companies. We have increased the positive developments year after year and in 2023 recorded 354 positive developments. Contact us to discuss how Morningstar Sustainalytics can support your company engagement activities.



  1. Sustainalytics ESG Risk Ratings measures a company’s exposure to industry-specific material ESG risks and how well a company is managing those risks. We identify five categories of ESG risk severity that could impact a company’s enterprise value: negligible, low, medium, high and severe. To learn more visit:
  2. Sin, K., Elleman, P. 2022. “What Happens When Companies Are Receptive to Investor Feedback on ESG?” February 10, 2022.,and%20its%20company-specific%20exposure%20to%20material%20ESG%20issues
  3. “Also known as the Fourth Industrial Revolution, Industry 4.0 is the next phase in the digitization of the manufacturing sector, driven by disruptive trends including the rise of data and connectivity, analytics, human-machine interaction, improvements in robotics.” McKinsey & Company. 2022. “What are Industry 4.0, the Fourth Industrial Revolution, and 4IR?” August 17, 2022.

Recent Content

Material Matters: The Role of ESG Materiality in Sustainable Investment Strategies

In this article we define ESG materiality and highlight what investors need to know when considering the materiality of ESG issues in their investment portfolios.

Constructing a Sustainable Future: The Crucial Role of Water Stewardship

Explore how construction companies are managing water risks amid climate change, with insights from Morningstar Sustainalytics’ enhanced ESG Risk Ratings on water use and stewardship in the sector.

Shifting Gears: The Auto Industry’s Transformation and the Rise of Chinese EV Manufacturers

The rise of China's electric vehicle manufacturers represents more than just commercial success – it reflects profound changes across the auto industry worldwide. Discover how this impacts market trends, ESG performance, and investment strategies.

The Downside of Digital Transformation for Utilities: Data Privacy and Cybersecurity Risks

This article highlights the increasing materiality of data privacy and cybersecurity risks for utilities. It outlines the sector’s digital transformation and the ensuing cybersecurity vulnerabilities that have followed. It also shows how companies are responding to these risks and the changing regulatory landscape.