The National

Protecting nature requires vigilance

Protecting the natural environment around big cities requires sound regulations but also alert, persistent enforcement.

National Editorial

August 07, 2012

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Unspoilt natural beauty holds a primeval allure for humankind - and especially, it seems, for property developers.

There is profit to be made by ripping into, paving over and building up anyplace where others will buy housing - with all modern conveniences, of course - overlooking places of scenic natural tranquillity. And if some of that natural beauty is sacrificed in the process, well, you can't derail "progress".

But you can, and sometimes should, slow it. As The National reported this week, the Environment Agency-Abu Dhabi (EAD) did just that recently, halting unauthorised dredging that would have uprooted 60,000 square metres of mangrove swamps along the north channel of Reem Island in the capital.

The incident is not, to be sure, enormous in itself: 60,000 square metres is just 6 per cent of one square kilometre. But EAD inspectors say that when they investigated a report of the dredging, they discovered "numerous other violations" connected to the project. And there is reason to believe that such energetic development, with or without the required approvals, is all too common.

The construction of new islands, dredging work, new hotels and residential complexes near the shoreline and other projects amount to a relentless assault on the mangroves, to speak only of this one species and the wildlife it shelters. More than half of Reem Island's mangrove areas, for example, have been lost since development there began in 2005.

Development is, to be sure, an essential and welcome part of modern life; most of us live and work in buildings that were not here 25 or 30 years ago. But the interface between development and ecological protection is a tightrope: it is alarmingly easy to fall from sustainability down to environmental degradation.

To strike a sound balance, officials develop and adopt detailed regulations. But this process is drained of all meaning when less effort goes into constant enforcement. In this one project alone, for example, it is distressing that the rules against mangrove dredging were circumvented or ignored "numerous" times.

Nature, in its beauty and its innate appeal, is its own worst enemy. To protect natural environments from too-eager human intervention, good intentions and prudent planning must be accompanied by persistent and resolute enforcement.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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