Harnessing COP28 to supercharge the UAE’s impact investing agenda

16 Aug, 2023 - UAE Life & Economy

With the eyes of the impact world turned to Dubai for COP28, it is critical that we find ways to communicate the UAE’s attractiveness as a hub for deploying and receiving capital to impact investments.

The opportunities for impact investing – investing for both financial and social/environmental return – are enormous for the UAE, and it should be the home for impact finance.

Impact finance ecosystem in the UAE

Firstly, we must find ways to communicate the attractiveness of the region as both a source and destination for impact finance. The Gulf’s position as a source of capital is already established; there are a diverse and dynamic array of investors – from institutional capital to dedicated clean energy financiers, such as Masdar, to family offices – interested in deploying their capital for good.

But we must move beyond a narrative of the UAE being a source of impact finance and communicate our value in being a destination for deploying it. The UAE has a distinctive financial and innovation ecosystem which allows it to effectively deploy capital for impact within its borders, and across the wider region.

There is an abundance of latent expertise in investment project development, aggregation and brokerage. It has the linkages to harness investment in unique regional opportunities that meet distinctive regional issues.

Indeed, the opportunities for impact investment here are vast: Clean energy, access to water, youth employment, biodiversity, ecotourism, and life underwater. We just need to tell the story.

We should also look again at the opportunities in the UAE’s stable public markets. Recent research by the world’s peak impact investing organisation, the GIIN, indicates that there is growing opportunity to invest for impact in public markets.

The market for public debt (e.g. bonds,) had grown by 101 percent, while equity grew at a CAGR of 14 percent over a five-year period. What role can the UAE’s stable and respected capital markets play to scale impact finance in public markets – whether sukuks, designing and launching new ventures, or leveraging existing vehicles?

This is not to say the task is without its challenges. The spectre of the Abraaj collapse lingers over the impact sector in the region. Work is still being undertaken to communicate the progress made against the Financial Action Task Force (FATF) grey listing, but the opportunity presented by the region and our strong distinctives outweigh the challenges.

Simply put, the UAE could inhabit a unique place in the impact financing world order. It combines an innovative business environment with pro-business policies, an ambitious and stable political class, high quality of life indicators, and an unrivalled innovation ecosystem – and with that, the talent, funding, ambition and opportunity to mobilise capital for good. We just need to tell the story.

This article was first published in Arabian Business on 16th August 2023.