Late last year, a survey from Standard Chartered Bank revealed that 74% of UAE investors would like to leave a positive legacy through sustainable investments – a figure that compares favourably to the global average of 65%.
As Marc Van de Walle, Global Head of Wealth Management at Standard Chartered Bank, said: “The world is becoming more aware of the pressing issues we face, from economic and social inequalities to the catastrophic effects of climate change. While the pandemic has heightened these issues, it has given us the chance to pause and reassess our priorities.
“With growing awareness of these global problems, investors recognise they have a responsibility to make a difference,” he added.
In light of this, I conducted my own Twitter poll, which gave some similarly enlightening results. I asked what people prioritise when choosing where to invest their money. No surprises that among both Arabic and English investors, price remains a key concern.
But sustainability came a close second, with 37.1% of the 3,594 Arabic poll participants prioritising this factor, and some 25.5% of the 1,520 English speaking voters considering it their number-one concern.
So it seems interest in sustainable investing is at an all-time high. Increasingly, investors are looking beyond their returns and considering how their choices can make a positive impact. What’s more, the two needn’t be mutually exclusive.
We live in a world where investment has become much easier – with banks, apps, crowdfunding sites and financial companies all vying for our money. And with this ease has come a great deal of information about investments. We can quickly find out where our money is going, and how corporations make profits. The power lies with us as investors, regardless of the level of sophistication or funds in question.
UAE Minister of State, Ahmed Al Sayegh recently agreed that there is an upswing in companies incorporating sustainability into their post-pandemic recovery plans. We’ve all come to expect a higher degree of corporate responsibility and – more than ever before – people are voting with their wallets.
And when you consider that investment luminary Larry Fink, CEO of BlackRock – one of the world’s largest asset and investment management companies – revealed in his 2020 industry-shaping annual letter that his firm was putting sustainability at the centre of its investment strategy, it’s clear that the time has come to take this issue seriously.
Following up in his 2022 letter, Fink revealed that BlackRock’s sustainable investments have now reached a staggering $4 trillion. He also highlighted that “all markets will require unprecedented investment in decarbonisation technology”, and asked “businesses to demonstrate how they’re going to deliver on their responsibility to shareholders, including through sound environmental, social, and governance practices and policies”.
However, while sustainability has obviously gained significant momentum within the world of business, what surprises me is that 26% of UAE investors – according to the Standard Chartered survey – simply do not consider sustainability when making investments.
With this in mind, I thought I’d set out the case for why we should all ensure sustainability when looking to invest, and not only for altruistic reasons…
The clue’s in the name
First off, a sustainable company – by its very nature – is more likely to have carefully considered the future of, and the effect of its activities on our world. Increasingly, companies are being asked for transparency in terms of their actions, with consumers, stakeholders and governments requiring a higher degree of corporate responsibility.
Measurable goals are already in place
Both locally and internationally, governments, authorities and organisations are all working towards sustainability goals and emission targets. Investing in a company that is either blissfully unaware or wilfully ignorant of these goals surely represents an unwise move over the longer term.
While environmental, social and governance (ESG) reporting is still mostly voluntary, we are moving towards more concrete requirements, and some 38% of respondents to Deloitte’s Global Risk Management Survey named ESG as one of the three risk types whose importance will increase most for their institutions over the coming two years.
Fossil fuels are finite
Perhaps one for the “well, obviously…” column, but it’s surprising how many people seem to ignore this consideration when choosing where to spend their money. While it’s true that these energy sources are still heavily relied upon at present, forward-thinking investors would do well to add future fuels such as solar, wind and hydro to the portfolios.
While investment giants such as the aforementioned BlackRock have not stopped investing in fossil fuel companies en masse (a short- to medium-term strategy, one would hope), those same companies are nevertheless actively seeking greener, more sustainable energy sources.
Our future is virtual
With the rise and rise of cryptocurrencies, non-fungible tokens (NFTs) and digital property, the virtual world – although arguably not yet a sustainable environment – represents an exciting prospect for investors. While blockchain and NFT transactions have come under fire for their energy usage, their environmental performance is likely to improve as virtual transactions become increasingly powered by greener fuels.
The writing’s on the wall
In short, those not considering sustainability in their investment portfolios are in danger of being left behind. It is vital for any savvy investor to keep their fingers on the pulse of current trends, and it very much seems to me that in 2022, these trends will be heavily focused towards sustainability.
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