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Mon 20 Jul 2020 12:04 PM

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Saudi Arabia shows sustainable investing is here to stay

The outbreak of Covid-19 has not stopped the growth of environmental, social, and governance investing, writes Zahara Malik

Saudi Arabia shows sustainable investing is here to stay

Prior to the pandemic, environmental, social, and governance (ESG) principles were gaining importance to investors both regionally and globally due to the rise of responsible investing. 

The outbreak of the Covid-19 virus has not stopped the growth of ESG investing, which has seen a steady increase in inflows and better-than-average returns since the start of the pandemic.

Having moderated a panel recently during the BMG Economic Forum, focused on sustainable investing globally and in Saudi Arabia alongside global and regional experts - including Reema Alasmari, CEO and managing director, Natixis Saic, Amine Jaoui, CEO, Societe Generale Saudi Arabia, Marie Dzanis, executive vice president & CEO, Northern Trust Global Investments and Salah Shamma, head of MENA Equity Investments, Franklin Templeton Emerging Market Equity - it is evident that sustainable investing is here to stay.

The pandemic has propelled the importance of sustainable investing, which has been embraced in full force by Saudi Arabia.

The Kingdom’s Vision 2030 is overtly aimed at creating a more sustainable future not only from an environmental perspective or for its projects including NEOM and Red Sea Development, but also through future investment generation – which, by extension, involves inclusion of ESG principles.

Within the pandemic arguably sustainable flows are still within their early stages, investors are becoming increasingly aware that the sustainable investments will unfold over the next few years, a return advantage may be gained during the transition to a more sustainable world.

However, we must also recognise that irrespective of the continued focus of sustainable investment global markets are under pressure with continued economic damage and downturn caused by the pandemic forcing global governments to pause efforts within sustainability as they navigate through a phase of recovery.

However as per the insights given during this important session, any current setbacks are merely temporary. The social cog in ESG has captured a greater attention to investors and institutions due to the pandemic. Issues which include employee welfare and safety has forced stakeholders to reconsider their social purpose internally and across the globe.

As noted by Blackrock, “what matters [now] is the resilience of companies to shocks, and we see sustainability becoming a core part of the investment processes as a result”

Growing demand

Furthermore, in the report commissioned by Société Générale and the World Government Summit, the impetus for ESG and social investing comes from the growing demand and need for investment diversification and/or to satisfy the increasing consciousness of ESG principles for investors. As noted in my previous article, regional Green Bonds and Social Impact Bonds highlight the continued need for sustainable investment opportunities here in the region due to the increasing demand and focus for sustainable investment for investors and institutions.

Evidently sustainable investment and the adoption of ESG across the GCC is here to stay, government strategies across Saudi for example are aiding investors and companies to adapt and shift their focus to ESG.

Arguably due to the pandemic there will be a greater adoption of ESG investing, companies who have already immersed themselves within ESG principles are proving to be profitable and generating greater value for shareholders with long-term growth prospects.

Furthermore, the alignment with government vision across the GCC couple with performance of ESG funds during the pandemic continue to be a desirable choice for investors across the region.

Zahara Malik is CEO & co-founder Grosvenor Capital

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