ESG on the rise among UAE retail investors

Sustainable investment is at a critical juncture among UAE retail investors with an overwhelming majority interested in ESG funds. 

However, fund managers must adapt if they are to capitalise on this growing demand, according to recent research. This means incorporating greater use of alternative date sources and specialised skills as well as creating more ESG-related products. 

A survey conducted by the CFA Institute entitled ‘The Future of Sustainability in Investment Management: From Ideas to Reality’, showed that 94% of retail investors in the UAE are either already investing in sustainable strategies or are planning to invest, an increase on the previous year’s 90% result. Furthermore, 74% are willing to give up some returns in order to meet their investment goals. 

“As the Middle East’s second-largest economy, the UAE has shown an increasing appetite towards sustainable investment opportunities, as part of the country’s long-term vision,” said William Tohme, CFA, senior regional head, Mena at CFA Institute. 

The most promising products identified by the survey’s respondents include ESG index tracking and quant funds, ESG thematic products, ESG multi-asset products, climate transition strategies, long-term engagement, and better benchmarks.

The research, which canvassed 7,000 investment professionals, also found a relative scarcity of sustainability talent in the investment industry, while also noting that things are improving. The number of investment professionals on LinkedIn that include ESG as an area of expertise has grown by 26% in the last year. 

Greater use of alternative data was also highlighted by 71% as a necessity to make ESG ratings more robust. 

“Investment firms that incorporate sustainability into their business models need access to specialist knowledge to enrich their investment capabilities and to bridge the data gaps,” Rhodri Preece, senior head of industry research at the CFA Institute. 

“Education and training in the ESG space, along with the rise of alternative data sources and enhanced disclosure frameworks, will equip firms to deliver on the potential of sustainable investing,” he added.

©2019 funds global mena

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