Countries should remove obstacles to investment and step up collaborative action to ensure that the global recovery from the Covid-19 pandemic is green, inclusive and sustainable, a United Nations forum heard on Monday.
Government officials, business leaders and UN representatives gathered online during the opening summit of the seventh World Investment Forum with the theme of “Investing in sustainable recovery” to address the key challenges facing investors in a post-pandemic world grappling with the looming threat of climate change.
"The first challenge is to mobilise global investment for the UN Sustainable Development Goals: What we need is a broad-based, equitable recovery that runs at the same speed for everyone – no one should be left behind," Abdulla Shahid, president of the 76th Session of the UN General Assembly, said at the forum. "Let us work to ensure that recovery plans and programmes are aligned with SDGs and climate targets at each step of the process."
The 2021 World Investment Forum comes at a critical time for global investment and aims to address the main obstacles facing the investment-for-development community worldwide. Organised by the United Nations Conference on Trade and Development (Unctad), the forum aims to tackle the challenges and opportunities arising from the new industrial revolution, the need for sustainable development and the improvement of economic resilience.
"Recovering from the Covid-19 crisis and building forward better will not be possible without reigniting investment as an engine of growth," said James Zhan, director of the investment and enterprise division at Unctad. "We need a big push for investment in sustainable and inclusive recovery."
The role of the private sector is critical in driving growth, boosting jobs and contributing to sustainable development, according to Mr Shahid.
"Global stimulus packages committed $3.5 trillion of public funds towards a post-pandemic recovery," he said. "While only a tenth is destined for developing countries, the private sector can leverage these funds to multiply the impact 10 times. This will provide one-third of the total investments needed to reach the SDGs."
Sustainability and resilience must be fully ingrained into countries' policies and companies' corporate culture, Mr Shahid said. Foregoing this could expose them to further risks in the future, more debt and more setbacks.
"A focus on sustainability and resilience will fundamentally and strategically change how countries, companies and communities think about competitiveness and investment opportunities," the UN official said.
The global investment community must remobilise investment, channel it into SDG sectors, particularly in poverty ridden countries, and redouble efforts to ensure that it generates sustainable development, executives at the forum said.
The impact of the Covid-19 pandemic has been particularly devastating for women, the poor and vulnerable groups, Amina Mohammed, deputy secretary general of the UN, said.
"As investors you have enormous leverage on our future," she told the forum, adding that without bold action, the impact on economies will be devastating.
Many developing economies are in a "spiral of financial distress" as they face higher borrowing costs and are forced to divert funds from public spending into servicing debt, Ms Mohammed said.
"The future must be inclusive, just, prosperous and sustainable," she said.
Bill Winters, chief executive of Standard Chartered, said that the global economic backdrop is "encouraging" with a strong rebound expected this year and the next on the back of monetary and fiscal support.
However, with governments slowly withdrawing some of this support, Standard Chartered is "carefully monitoring" this withdrawal and watching out for factors that can disrupt growth including new Covid variants, oil prices, inflation and supply chain disruptions, Mr Winters said.
The executive also highlighted the need for investments in developing economies.
"The need to work in a collaborative way has never been greater than right now," Mr Winters said.
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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.”
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
