News Middle East12 May 2022

Middle East:High-net-worth investors look to sustainable investment and Islamic finance

| 12 May 2022

Around four in five (81%) of regional high-net-worth (HNW) investors in the Middle East say that they already take sustainability and ESG into account when making investment decisions, according to a survey commissioned by the Geneva-headquartered global wealth and asset management firm Lombard Odier.

Environmental protection and decarbonisation continue to move up the policy agenda across the region and investors want to play their part. Importantly, investors recognise a link between performance and ESG factors, with 72% of respondents stating that they believe sustainability factors can generate superior returns.

Respondents express a need for more clarity and advice from specialists on how to invest sustainably, stating a desire to receive regular research on sustainable investment ideas (78%) and portfolio sustainability benchmarking (77%).

Lombard Odier says that the results are a clear indication that financial institutions in the region need to provide more guidance to help investors express their ESG-related values. Just 29% of respondents say they are very satisfied with the service that they currently receive from their banking partner and around half (58%) are quite satisfied.

Shariah principles

The survey also highlights the significant overlap between Islamic and sustainable finance, since both involve acting ethically and responsibly. Indeed, the overwhelming majority of HNW investors, regardless of age, want to reflect traditional Middle Eastern values in their investments. They have already taken significant strides to integrate their Islamic beliefs via Shariah-compliant strategies and plan to increase those allocations.

According to the survey, 67% of Middle Eastern HNW investors state that observing Islamic investment principles is important to them. There is strong appetite for this type of investment, with sukuk and Islamic loans being the two most favoured Shariah-compliant asset classes in the region.

Private equity follows close behind the above classes, with almost a third (30%) of investors surveyed reporting an interest in private equity that complies with Islamic finance principles. This type of asset allocation therefore remains essential for regional investors, offering a means of gaining exposure to growth opportunities across a wide range of business sectors.

The survey reveals that Shariah investing is also important to younger investors, with 54% of 18-40 year-olds investing accordingly for some of their assets. This is reinforced by the larger Shariah-compliant asset allocation among the younger generation, who allocate on average 52% to Shariah investments vs 48% for those aged 40 and upwards. This is expected to increase to 60% in the next five years for younger investors, compared to 56% for older investors.

The survey polled 300 high-net-worth (HNW) investors and business owners from the United Arab Emirates, Saudi Arabia, Kuwait, Oman, Qatar, Bahrain, Egypt and Lebanon. Respondents include both younger investors (aged 18-40) and older generation investors (aged 40 and upwards).

Headquartered in Geneva since 1796, Lombard Odier had 26 offices in 21 jurisdictions and employed 2,650 people at end-December 2021.

The full report on values-based investing can be found on Lombard Odier’s Insights page.


 

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