The UAE Central Bank and the International Monetary Fund met in Abu Dhabi to discuss relations, including joint co-operation on sustainable financing ahead of the Cop28 climate summit hosted by the Emirates in November.
The banking regulator's ambitious agenda for green financing, aligned with the UAE's strategy for sustainable economic growth and financial stability, was also a key topic of discussion, the Central Bank said on Wednesday.
“We welcome all efforts to strengthen our co-operation and relations with international financial institutions, particularly the International Monetary Fund," Central Bank governor Khaled Balama said.
"The UAE acknowledges the role these ties play in supporting our efforts to establish sustainable growth in various sectors and in enhancing the UAE’s position in the global stage and its contribution to providing effective solutions that ensure financial stability, drive global economic growth and encourage sustainable development.”
Earlier on Wednesday, Abu Dhabi clean energy company Masdar said it raised $750 million through the sale of 10-year senior unsecured notes that will help it fund renewable energy projects.
The green bond was 5.6 times oversubscribed, with the order book peaking at $4.2 billion, Masdar said.
Ahead of the UAE hosting the UN climate change conference, the country is seeking to prioritise initiatives that advance climate finance and decarbonisation.
The Central Bank and the IMF representatives also discussed efforts to enhance the integrity of the financial system and support global economic growth, the statement added.
The two entities also addressed the current and projected state of the regional and global economy amid growing geopolitical tensions, which have led to a slowdown in growth, higher inflation and bigger risks to trade and capital flows.
The banking sector in the UAE is well capitalised with adequate liquidity buffers and remained resilient last year against the risk of stagflation and market uncertainty, the Central Bank said last week.
Banks also benefitted from the UAE’s robust economic momentum last year, as aggregate credit growth rebounded and profitability jumped, the banking regulator said in its Financial Stability Report 2022.
Other topics discussed during the meeting included sustainable development indicators, economic growth and developments in the UAE's financial system as the country is expected to maintain "healthy levels" of gross domestic product growth, despite global challenges, the Central Bank said.
"This growth is attributed to growth in non-oil GDP and the UAE's commitment to diversification, knowledge, innovation and digitisation, which has contributed to the distinguished resilience and stability of the country’s financial system," the regulator said.
The UAE Central Bank in June revised its forecast for the country's non-oil economic growth for 2023 to 4.5 per cent, from 4.2 per cent in March, amid a surge in its travel and tourism industry, while inflation is projected to slow marginally.
After expanding by 7.2 per cent last year, the non-oil sector is estimated to have grown at a slightly lower pace in the first quarter of this year, the Central Bank said in its Quarterly Economic Review.
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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.”
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