Insight and opinion from The National’s editorial leadership
November 12, 2021
Climate change is coming fast to the Middle East, but so is the desire to do something about it.
At this year's Cop26, the world saw the many different ways the region's countries are joining the conversation. And now, the Middle East is showing it wants to not just be part of the solution, but a home for it, too. The latest example came on Thursday, when it was announced that the UAE will host Cop28, scheduled to be held in 2023.
The UAE's leaders congratulated the country for winning the bid to host the "most important" of meetings.
Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, tweeted after the announcement that the UAE would put everything towards making Cop28 a success.
Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, said the UAE looked forward "to working with the international community to accelerate global efforts to address climate change and environmental protection and create a more sustainable economic future”.
After the decision, Sheikh Abdullah bin Zayed, Minister of Foreign Affairs and International Co-operation, offered a reminder that it was Sheikh Zayed, the Founding Father of the UAE, who has inspired "us as we strive to safeguard the well-being of present and future generations".
"Cop28 in 2023 will and must be a ‘solutions Cop’ – and I am confident that the rich experience of this young, inclusive nation in advancing practical, viable and shareable solutions to the world’s most pressing challenges will again come to the fore as we host the world for the UN Climate Change Conference in two years’ time," he said, according to Wam.
"The UAE Net Zero by 2050 Strategic Initiative, announced earlier this year, shows our own unwavering commitment to promoting climate action. Further, through new investment commitments and partnerships, we are illustrating our determination to support the world in addressing climate change."
Choosing the UAE to host Cop28 is also another huge moment for the environmental movement in the region, which will follow in the footsteps of Cop27, to be held in Egypt.
Having back-to-back conferences in the Middle East and North Africa is a sign of how the event is changing. Its early years were confined to Europe, when the foresight of countries such as Germany spotted the need for it as far back as the 1990s. But, as the global significance of the issue at hand becomes clear, Cop has been held all over the world. Now, it is very much in its Middle Eastern phase.
And that has much to offer the world. In the most basic sense, the region is an early example of the dangers ahead. It is the most water-stressed part of the planet, with a rising temperature double the global average. This burden will be borne by some of the most fragile societies, made up of people who often have known few of the highly polluting luxuries for which the developed world is largely responsible.
But reconfiguring this conversation is not just about the UAE's efforts; the successful bid would not have been possible without the backing a number of other countries, including all member states of the UN's Asia-Pacific Group and the Arab League. It is this ability to rally global support that will also make Cop28 one to watch. At this year's meeting, the atmosphere between the world's biggest emitters has not been easy, something that may stop the event reaching its full potential. Agreement may become easier as the conversation shifts to new geographies.
And Cop is not just about getting governments on board, but industry, too. Earlier this month, The National spoke to Claire O'Neill, managing director of climate and energy for the World Business Council for Sustainable Development. Discussing the prospect of upcoming conferences in the Middle East, Ms O'Neill said: “I think the next Cop cycle will be a new chance to amplify those of the world's most sustainable businesses who are committed to net zero by 2050, nature positive and committed to reducing inequality and total transparency in reporting.”
Agreement may become easier as the conversation shifts to new geographies
A hub for international business, the UAE would also be a particularly strong location for major industries to discuss how they might contribute to fighting climate change outside western contexts. After all, a corporate sustainability strategy that works in the US or Scandinavia might well not work in the Middle East or the rest of the world. We are already seeing this mixing of expertise at work at Expo 2020 Dubai, where a number of countries and companies from all over the world are providing sustainable engineering for the UAE's desert location.
As part of its commitments under the 2015 Paris Agreement, the UAE recently announced it has stepped up its plans to plant mangroves, and now aims to plant 100 million by 2030. After Thursday's announcement on Cop28, the UAE will help plant the seeds for a new regional culture of environmentalism, too.
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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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