The Middle East as a region has long been regarded as a laggard as far as ESG is concerned, but there is a sense that this is changing.

Some corporations have been leading the way, and at the Cop26 summit in Glasgow in 2021, the United Arab Emirates (UAE) committed to net-zero carbon emissions by 2050 while Saudi Arabia and Bahrain also pledged to achieve net zero by 2060.

ESG is certainly moving up the agenda especially as Cop28 is due to take place in the UAE in November next year. Sign of the shift is that, on 9 November, the Abu Dhabi Global Market (ADGM) published a consultation paper on a sustainable finance regulatory framework.

The framework, which covers both funds and the debt capital markets, intends to help Abu Dhabi grow its sustainable finance sector and support the country’s attempts to reach net-zero.

The amount of capital to be mobilised in the region is significant.

Alex Murray, vice president of the research insights team at Preqin in London, estimates that the sovereign wealth funds in the region, as well as numerous family offices, can currently mobilise around $3trn in total assets under management.

He was speaking at the “Alternatives in the Middle East 2022” webinar organised by Preqin on 16 November.

“The ecosystem is coming together. The industry wants to do things, and the regulators and the investors are also coming in. Everything is coming together,” said Bhaskar Dasgupta, head of strategic development for the Middle East and Africa at asset management platform Apex Group.

He pointed to the Middle East Investment Management Association, a trade association, which launched in July this year as a representative body to “support, champion and advance the growth and development of the asset management industry in the region”.

“One of the key strands within this which most of the members have very strongly indicated that they are interested in is ESG,” he added.

Getting serious about ESG

Karim El Solh, co-founder and chief executive officer of Dubai-based alternative investment firm Gulf Capital ($2.5bn AUM), confirmed that the region is getting serious about ESG, specifically renewables.

“What has been done in renewables is impressive, especially in solar,” he said on the webinar.

Gulf Capital was an early investor in the sector. It took a stake in SES Smart Energy Solutions, a Dubai-headquartered power provider in 2012 and installed the first hybrid solar plant in Saudi Arabia in July 2015.

He points out that Gulf Capital was the first Middle Eastern signatory to the Terra Carta Sustainability Initiative launched at Davos in 2020 to help the private sector accelerate its progress towards a sustainable future. But the bottom line remains that it is profitable.

“One thing we realised the more we focused on sustainability – clean water, water treatment, renewables, food security – is that it is a good investment opportunity. In this environment, you can do good and do well at the same time,” he said.

It was a point picked up by Laura Merlini, managing director for industrial relations for Europe, Middle East and Africa for Massachusetts-based global professional body the Chartered Alternative Investment Analyst (CAIA) Association.

“Failure to consider ESG factors in your portfolio is simply a failure of your fiduciary duties,” she said. A number of asset managers in the Middle East, she says, are doing it well.

“We’ve already seen the Qatar Investment Authority which has recently invested in vertical farming as a way to enhance food security,” she said.

The state’s sovereign wealth fund ($445bn AUM) has been investing in vertical farming, notably a part of a $200m Series D stake in Dutch indoor farming startup Infarm in December last year.

The elephant in the room

But there is, however, an elephant in the room. Merlini also mentions Saudi Arabian Oil Company’s (Aramco) announcement of the creation of a $1.5bn sustainability fund at the end of October.

Managed by Aramco Ventures, the venture capital arm of Aramco, the fund says that it plans to invest in technologies that support the company’s net-zero goals and the development of new lower-carbon fuels.

All good news. But Aramco remains the world’s largest oil producer. The most recent MSCI Net Zero Tracker report from the very end of October still names it as the world’s largest polluter, responsible for 3.1% of global annual greenhouse gas emissions.

The company’s sustainability report makes for depressing reading. The company expects to have cut emissions only marginally between 2021 and 2035, all while boosting oil production from 12m barrels per day today to 13m by 2027, and gas production by 50% by 2030.

More to the point, there is no mention at all in the sustainability report of Scope 3 emissions – those connected with a company but outside its direct control.

According to the MSCI report, Aramco’s Scope 3 emissions of 2bn tonnes of carbon dioxide for the 12 months to the end of August, make up 96.2% of the company’s total emissions.

No wonder that London-based think tank Carbon Tracker called the group’s sustainability report “heavy on rhetoric and light on substance”.

Aramco’s position was not discussed in those terms during the webinar. But the sense is given that whataboutism should not halt the work that is going on.

As El Solh says: “It’s the first time where we see sustainability becoming an exciting investment.”

Latest News

Read

Is the Middle East waking up to ESG?

The Middle East as a region has long been regarded as a laggard as far as ESG is concerned, but there is a sense that this is changing. Some corporations have been...

Capital Monitor

Read

When is the Best Time to Visit New York?

With a metropolitan population of almost 19 million people, New York City is a true melting pot of cultures, ethnicities and personalities. Contrasts between Wall Street and Broadway, Harlem and the Upper...

Elite Traveler

Read

Nick Cave: “I don’t think art should be in the hands of the virtuous”

For two decades there have been plans for a statue of Nick Cave in his birth town Warracknabeal, 200 miles north-west of Melbourne. Cave was to be cast in gold, riding a...

The New Statesman

Read

The best London restaurants for West African fine dining

London is a thriving capital city that is home to a multitude of ethnicities and embraces the flavourful relishes that they bring. As a result, its cuisine offering is extensive and...

Elite Traveler

Read

Google AI learns to identify ‘consensus’ on controversial topics

AI engineers at Google have developed a machine learning model that identifies the consensus on controversial topics, the company said this week. The search giant is using the system to prevent misinformation being included...

Tech Monitor

Read

The five biggest marketing trends for 2022: Free report

CMOs from Chip, Deloitte Digital and Mindshare have contributed to a new report from the New Statesman Media Group, which reveals the five biggest talking points in boardrooms around the UK...

Press Gazette

Read

The Great War’s miracle worker

A rare but greatly feared complication in brain surgery is complete facial paralysis from damage to the part of the brainstem called the floor of the fourth ventricle. I saw this...

The New Statesman

Read

The Best Restaurants in Tulum

Any foodie visiting Mexico will no doubt be drawn to the celebrated eateries of Puebla, Oaxaca and, of course, Mexico City. But for those looking to stray a little off the beaten...

Elite Traveler

Read

China’s new ESG disclosure standard “of limited use” to investors

China’s new standard for corporate ESG disclosure has made international headlines, but its impact is expected to be minimal as it has not yet been endorsed by any regulator and remains voluntary....

Capital Monitor