Damian Hitchen, CEO of SAXO Bank MENA, talks about ESG investment and how COP28 will impact sustainability trends in the region
In recent years, the UAE’s commitment to accelerate its sustainability objectives from discussion to action have been highlighted through laser-focused implementation of Environmental, Social and Governance (ESG) plans and policies by numerous public and private entities throughout the country.
Having declared 2023 as the ‘Year of Sustainability’, the host nation of COP28 is escalating its efforts to lead global efforts on ESG education and benchmark the contribution levels expected from organizations across the Emirates. These latest moves are progressive and ambitious, but they also follow a clear pattern.
In 2021, the UAE announced its Net Zero by 2050 initiative, making it the first country in the densely populated, carbon economy-rich MENA region to publicly make the pledge. Last year, the Dubai Investment Fund launched an ESG Investment Department to monitor global and local markets to identify investment opportunities. Ever since, key regulators including Dubai Financial Services Authority (DFSA) and Abu Dhabi Global Market (ADGM) have continued maturing secure financial ecosystems with enforced sustainable frameworks for organizations to prioritise sustainability and align their policies with social and community impact.
Now, with sustainable practices permeating multiple industries domestically and internationally, a rising trend of green stocks represents a massive opportunity for investors. Institutional investors are driving the sustainable market but interest from millennials has been growing steadily, creating a domino effect that will make companies become more purpose-driven and improve their sustainable business objectives. In this landscape, it is key to take a comprehensive view of potential ESG impacts and understand the long-term financial returns of the investment before determining whether to invest.
While the ESG data market is relatively nascent, there is no doubt the region’s transition towards it – a shift which comes despite the many regional nations’ historic dependence on carbon contributions to their economies and growth. Some of the key regional sustainability trends include financial entities promoting sustainable finance and encouraging stronger cooperation between public and private sectors. According to a Sustainable Future Study by Bloomberg Media, renewables and clean energy lead the pack in terms of return on investment. However, businesses are now being encouraged to explore other avenues of investment that deliver a more integrated approach to sustainability.
While the UAE’s hosting of COP28 underlines its commitment to fight climate change, an investment pledge of AED 600 billion investment by 2050 comes with its own set of challenges. As the effects of climate change intensify each year, there is an urgent need to transform multiple industries to meet sustainable development targets, avoid greenwashing, and create transparent and pragmatic resolutions.
With COP28 fast approaching, there is increased emphasis on regional and global leaders putting monolithic political and economic differences aside to explore the role of technology and how it is going to support sustainable development and influence investment opportunities to address sustainable agriculture, greenhouse emissions, marine ecosystems and clean energy resources.
