ESG-led investments 'unequivocally' deliver better returns

Companies whose business activities are centred on ESG principles are likely to attract loyal clients, employees and financial backers, Investcorp co-CEO says

Rishi Kapoor, co-chief executive of Investcorp, says the company is 'doubling down on our efforts, particularly with regard to financing the decarbonisation journey'. Leslie Pableo / The National

Investcorp, the alternative asset manager that counts Mubadala Investment Company as its biggest shareholder, said environmental, social and governance-focused investments are likely to outperform traditional ones in the long run because these companies create “strong engagement” with customers and talent.

Companies whose business activities are centred on ESG principles are likely to attract loyal clients, employees and financial backers, making them more successful in the long-term, Rishi Kapoor said at the Abu Dhabi Sustainability Week on Monday.

“When you have those three working for you it shouldn't come as any surprise that in long run, these companies are going to deliver excess returns because they have the competitive advantages in terms of capital, people and customers,” he said.

Investcorp, which was founded in 1982 and has $37.6 billion in assets under management, on Monday released its own 2021 ESG report titled "Responsible Business".

Forty-eight per cent of all new hires at the company were women last year while 32 per cent of its total number of employees are women, the report showed. Forty-five nationalities are represented across the firm and it launched a new policy that requires all shortlisted candidates to be from diverse backgrounds.

Meanwhile, mental health awareness and support has been made available to all employees.

“We have made much progress over the past year, but we are also keenly aware of the scale of the challenge ahead of us both in terms of our own activities as a corporation, and also our role as a provider of capital,” the company said in the report.

“Over the coming year, we will be doubling down on our efforts, particularly with regard to financing the decarbonisation journey, driving more equitable and inclusive employment initiatives, and providing more focused support on enhancing governance practices to those of our portfolio companies that would benefit most from this in the emerging markets,” it said.

“We remain agile in our approach to how we integrate ESG considerations across our investment processes to ensure we stay current and go to where the most pressing problems and opportunities are.”

From its own engagements with stakeholders, Investcorp identified a clear trend that investors are “increasingly keen to align their own core values and beliefs with their investments”, Mr Kapoor said.

“We refer to it a bit colloquially as letting your capital speak for you.”

As a result, investors are seeking greater standardisation in measuring and reporting on ESG goals, and are looking to invest in opportunities that provide innovative solutions to the biggest sustainability issues, he said.

Investments by sovereign investors globally into funds and companies following ESG standards more than tripled last year, Finbold.com and data from industry tracker Global SWF reported.

Investments by sovereign wealth funds in the ESG space surged to $22.7 billion at the end of last year from $7.2bn reported in 2020, while the number of sustainability-linked investment deals at the end of 2021 also rose to 37 from 19 a year earlier.

Sustainability in the UAE - in pictures:

Kyle Wagner, head of operations at Masdar Farms, shows the inside of the smart farming retrofitted shipping container in Abu Dhabi that grows four tonnes of leafy greens per year. Antonie Robertson / The National

A view of the domes used for urban farming in the Sustainable City in Dubai. Pawan Singh / The National

A member of staff tosses feed in the shrimp pond at an aquaculture farm in Abu Dhabi. Pawan Singh / The National

Jubail Mangrove Park in Abu Dhabi. Mangroves are abundant along the coastline of the emirate and can sequester and store carbon for thousands of years. Victor Besa / The National

Scimitar-horned oryx, part of the antelope family, at the Deleika Wildlife Management Centre in Abu Dhabi. Khushnum Bhandari / The National

About 30 turtles are released into the sea on World Sea Turtle Day at Jumeirah Al Naseem beach in Dubai. Pawan Singh / The National

Cyclists get up early to exercise at Al Qudra Bike Track, Dubai. Chris Whiteoak / The National

Workers prepare tyres before the recycling process at the Gulf Rubber factory in Al Ain. Khushnum Bhandari / The National

A view of Barakah's Unit 2. Photo: Wam

Al Bahar Towers in Abu Dhabi use a solar shading system that features a computer-controlled facade made up of thousands of translucent units. Silvia Razgova / The National

Sheikh Mohammed bin Rashid Al Maktoum Solar Park is the largest single-site solar park in the world and central to Dubai's plans to obtain 75 per cent of its energy from renewable sources by 2050. Photo: Wam

Masdar City in Abu Dhabi is the first attempt in the Middle East to build a sustainable city. Chris Whiteoak / The National