I The Mideast’s Shift To Sustainable Investment

Sustainability

The Mideast’s Shift To Sustainable Investment

Middle Eastern countries are preparing to invest billions into ESG projects.

Last year witnessed the historic issuance of Egypt’s U.S. dollar sovereign green bond, making it the first in both Africa and the Middle East and the first sovereign bond to list on the London Stock Exchange.

Besides helping strengthen the country’s Environmental, Social, and Governance (ESG) credentials, the move has opened Egypt up for those seeking to support FDIs, private equity, and sustainable lending, amongst other goals.

Egypt’s landmark climate-focused investment represents the remarkable growth in the Middle East’s socially investing market over the past decade. The region is home to some critical sustainable development opportunities, with an estimated annual financing gap of more than $100 billion in the Middle East, according to data by the Arab Forum for Environment and Development.

A 2020 HSBC study found that 62% of Middle East issuers and 47% of investors say “we believe it’s right” when asked why they care about environmental and social issues. These rates were also the strongest level globally, underpinning the significance of moral values in the region. In the U.A.E. specifically, 70% of issuers agreed. Similarly, in another 2020 survey conducted by the CFA Institute, 74% of U.A.E. investors with a values objective said they are willing to give up some return in exchange for meeting their investment goals. Meanwhile, 94% of U.A.E. retail investors were interested in or are using ESG in 2020, up from 90% in 2018.

Since 2015, Bahrain, Egypt, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, and the U.A.E. have all revised their corporate governance codes, incorporating efforts towards diversification. Saudi Arabia has been at the forefront of renewable energy in the region. From the $500 billion NEOM smart city to establishing the Saudi Industrial Development Fund’s Mtujadeda, the kingdom is strategically trying to move away from its dependence on oil towards other diversified energy sources. Due to the year-round sunshine and comparatively lower financing costs, solar power has been deemed the “new oil” for the region.

Since Masdar inaugurated the Shams Solar Power Plant in 2013, the world’s largest concentrated solar power (CSP) plant, solar energy use has seen continued momentum. Dubai’s Mohammed bin Rashid Al Maktoum Solar Park, Noor Abu Dhabi solar power project, and Masdar’s Shams Solar Power Plant are a few instances of capitalizing the climate efficiently in the U.A.E. The country was also the first in the Middle East to sign the Paris Agreement and has committed to reducing emissions across all economic sectors within NDCs Now, it’s exploring the possibility of producing green and blue hydrogen through the Abu Dhabi Hydrogen Alliance and has also launched a bid to host the COP 28 in the capital in 2023.

To meet the UN Sustainable Development Goals by 2030, regulators and government authorities are calling on investors to put ESG practices at the heart of their business strategies and connect capital to promote sustainable infrastructure development. And this transition to a low-carbon, sustainable approach to growth is forecasted to lead to an economic boost of $26 trillion up to 2030, with the possibility to create more than 65 million new jobs, as per the Global Commission on the Economy and Climate.

Mohammed bin Rashid Al Maktoum Solar Park