Covid-19 accelerates Middle East interest in sustainable investing

Investors in the Middle East are setting policies on responsible investing and incorporating impact goals for their portfolios following the onset of the Covid-19 pandemic, according to a new study.

Nearly 30 per cent of respondents in the region said they now believe more strongly in the importance of being sustainable when they invest, according to HSBC's 2020 Sustainable Finance and Investing Survey released on Wednesday.

The survey also found that sustainable finance is gaining momentum in the Middle East, with “values” the main driver among issuers of bonds, loans and other securities in the region.

“The results of the HSBC Sustainable Finance and Investing Survey reflect what we are seeing on the ground, with Middle East green and sustainable bond issuance so far this year up nearly 50 per cent on total issuance in 2019,” Gareth Thomas, HSBC’s regional head of global banking for the Menat region, said.

Among issuers in the Middle East, 93 per cent of respondents to the survey said environmental and social (E&S) issues are important to them, but only 65 per cent of investors said they felt the same way, compared with the overall global average of more than 90 per cent.

However, 41 per cent of investors said they intend to develop firm policies on responsible investing or on environmental, social and governance (ESG) issues.

“Among investors who already have these policies in place, very high numbers seek out material ESG issues when they invest and incorporate impact goals,” the survey said.

“Middle Eastern investors are also very optimistic about the benefits of ESG – more in this region than elsewhere see potential for ESG strategies to outperform.”

During the past few months, the region’s sustainable finance market has become more active. In September alone, Saudi Electricity Company raised $1.3 billion in the kingdom’s first public USD-denominated green issuance, while Egypt issued the region’s first sovereign green bond.

In January this year, Abu Dhabi-based clean energy firm Masdar introduced the UAE’s first “green” real estate investment trust with a value of up to Dh1bn, giving investors an opportunity to invest in a portfolio of income-yielding properties with a lower carbon footprint within Masdar City.

The survey found that moral values also influence issuers and investors. When asked why they care about E&S issues, 62 per cent of issuers and 47 per cent of investors said: “We believe it’s right.”

“The green agenda is here to stay so it is imperative that investors and issuers in the Middle East engage on the topic to better understand how they can capture the economic as well as environmental and social benefits of more sustainable business models,” HSBC’s Mr Thomas said.