Sustainable investing, which considers
environmental, social, and corporate governance (ESG) criteria to generate
long-term competitive financial returns and positive societal impact is gaining
momentum.
اضافة اعلان
Pension, social security, and sovereign
wealth funds, as the primary asset owners in the region, are the “elephants” of
the local financial markets. And they could be the catalysts for greening the world’s
economic systems.
According to the Thinking Ahead
Institute, assets under management by the world's top 300 pension funds rose
8.9 percent in 2021 to reach a record $23.6 trillion. The top 20 pension funds
now account for 41.0 percent of the total assets, with a compound annual growth
rate over the past five years of 8.8 percent, compared to 8.5 percent for the
top 300 funds.
In 2022, state-owned funds invested
heavily (with $261.1 billion in 747 deals in 2022, compared with $229.9 billion
from 890 transactions in 2021), with a 38 percent year-on-year increase in
sovereign wealth funds and a 9 percent decrease in public pension funds. The
Jordan Social Security Investment Fund (SSIF) saw particularly impressive
growth, increasing assets by 12 percent to reach JD13.8 billion at the end of
2022 — a JD1.5 billion increase from 2021.
Climate tech is predicted to become a $1.4 trillion market by 2026, with spending on low-carbon projects rising.
In terms of the SSIF
fund’s investment portfolios; the bonds portfolio accounted for 55.6 percent of
total assets, followed by equity at 19 percent, financial market instruments at
13.3 percent, real estate investments at 5.8 percent, loans at 3.1 percent and
the tourism portfolio at 2.4 percent.
The Middle East and climate tech
Climate tech is predicted to become a $1.4 trillion market by 2026,
with spending on low-carbon projects rising. This represents a compound annual
growth rate for climate tech of 8.8 percent.
The Middle East is poised to benefit from the rapidly growing climate
tech market, as it has abundant low-cost renewable energy. And green
investments in key industries have the potential to add $2 trillion to
cumulative GDP and create over 1 million jobs.
Globally, spending on low-carbon projects will increase by $60 billion
this year, 10 percent higher than 2022, led by wind developments and helped by
a significant rise in funding for hydrogen and carbon capture, utilization, and
storage infrastructure.
Green finance presents a huge opportunity for the Middle East, seeing as the region is exposed to the
transition risks associated with climate change, amplified by the dependence of
many economies and jobs on minerals, energy, and mining.
The Middle East is poised to benefit from the rapidly growing climate tech market, as it has abundant low-cost renewable energy. And green investments in key industries have the potential to add $2 trillion to cumulative GDP and create over 1 million jobs.
A key emerging issue that merits efforts
for policy research and policymaking is the ever-growing interaction between
industrial policy and trade, investment, and green bond guidelines.
A survey by Bain and
Company found that 65 percent of respondents expected an increase in their
company's focus on ESG over the next three years, with 68 percent of consumer
products executives believing ESG will increase share prices by enhancing their
brand image.
For Jordan, the SSIF
has an opportunity to lead the way in improving ESG compliance and playing a
game-changing role in various economic sectors, such as financial services,
clean energy, green mining, telecommunications, tourism, agriculture, real
estate development, and PPP projects.
As sustainable
investing continues to grow, the Middle East finds itself with a unique
opportunity to drive the shift towards a more sustainable future. And doing so
requires turning talk into action.
Hamzeh S. Al-Alayani is a board member of a Jordanian public-sector
government investments management company and a regular regional energy and
industrial commentator. Hamzeh holds an MBA from the University of Aberdeen,
UK, and a BSc in Mechanical Engineering.
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