DIF embraces investments in ESG and information technology

For a long time, corporate social responsibility and sustainability have been the hallmarks of the ethical investing community. For many years, most investors have viewed the ethical investing community as worthy but niche. However, the last ten years have witnessed a dramatic awakening in social consciousness regarding the challenges posed by global warming. At the same time, there has been a recognition that we are reaping the whirlwind of the industrial and digital revolutions. When research results from 2009 and 2021 are compared, it is clear that there has been a profound shift in how people think about environmental issues. In 2009, a survey showed that 54 percent of people were concerned about climate change and were willing to make a change to address the issue. By 2021, the percentage of very concerned people had increased to 72 percent, and 80 percent were willing to make changes.

Such changes have resulted in an exponential increase in capital directed toward sustainable financial products, with investment funds at the forefront of the worldwide shift. An excellent example of impact investing is provided by the Dubai Investment Fund (DIF), which is one of the largest funds managed independently on a global scale. The term "impact investing" refers to generating specific financial returns and positive environmental or social impacts.

The Dubai Investment Fund was established in the year 2001 to effect positive change across the globe. The phrase "We are a generational investor, seeking to make a difference with tomorrow in mind." can be found in the company's promotional tagline. DIF has become a significant player in the economy of the United Arab Emirates. The company has opened 17 offices worldwide and hired 2,600 people, including 920 investment professionals. The company has committed to preserving UAE's rich culture and heritage, championing relevant social advocacies, and serving global communities. This commitment comes as part of the company's pledge to uphold the highest standards of corporate responsibility.

A significant portion of DIF's investment portfolio was comprised of non-renewable energy sources when the organization started. However, with the help of a specialized team focused on the environment, sustainability, and governance (ESG), the management of DIF began actively reducing its exposure to energy sources that were not renewable. In the end, that exposure was lowered and replaced with better investments for society and the environment, such as those focused on renewable energy initiatives. Creating a dedicated ESG investment department has refined and stabilized DIF's focus, with ESG forming a key component of their due diligence when developing investment strategies for institutional clients.

The leadership of DIF has issued a challenge to major corporations, urging them to take responsibility for their part in protecting the environment and reducing the climate risks posed by corporations.

In recent years, DIF has been devoting a greater amount of attention to projects aimed at improving the quality of life for the population and cleaning up the planet. At the same time, the company made an effort to focus on projects headed in various directions.

As a result, 2019 started with investments in Clean Wind, a project whose primary goal is to address the challenges associated with recycling waste. DIF  was responsible for 51 percent of the total direct investments. The project planned to build a complex of processing businesses and recycle plastic waste as an environmentally friendly alternative to conventional waste disposal methods. Additionally, the project should help to create new jobs for more than 700 individuals.

The Energys project, which was engaged in providing the population of some African countries with energy-efficient equipment, received approximately 30 percent of the total investments made in the project in the year 2020 from DIF. The construction of a community with a low impact on the environment is the overarching objective of this project. The project will result in the construction of one hundred energy-efficient homes with unique heating, ventilation, and power supply systems. This should result in lower costs for the population's utilities while preserving the country's resources.

Another project, "The Next Shore," received complete funding from DIF in 2020. The project's focus was the risks posed by climate change, including but not limited to global warming, CO2 emissions, and ocean pollution. To accomplish these objectives, extensive work must be done in science, technology, economics, and socio-politics.

In 2020, DIF also invested in the information technology (IT) sector and acquired stakes in Shopify, HP, and Dell by adding their shares to its portfolio of assets. The focus of the Dubai Investment Fund is now on the responsible investment of client funds into ESG-friendly companies to achieve long-term growth for their stakeholders.

In 2020, the Morgan Stanley Institute for sustainable investing produced a report indicating that 85 percent of investors in the United States are interested in sustainable investing. When the same question was posed to Millennials, 95 percent of those polled stated that they are interested in sustainable investing. There were 52 percent of people in the former group and 67 percent in the latter group who had an interest in at least one sustainable investment. Notably, 86 percent of people connect positive ESG practices with higher profits for the company. On the other hand, 65 percent believe that one of the biggest obstacles is the lack of sustainable financial products.

The findings of Morgan Stanley are supported by research conducted by Global Impact Investing Network (GIIN). It adds that sustainable investments can offer risk-adjusted market-related returns and make a meaningful difference to today's problems. GIIN  warns potential investors that impact investments require significantly more research than non-impact investments and that truly impactful businesses are difficult to find. Even for larger institutional investors, it is not always possible to have in-house teams solely focused on the various investment strategies they employ. The solution, according to GIIN, is to make use of specialized experts that are available within ESG-focused investment funds. These funds have teams that conduct extensive, comprehensive, and ongoing research.

DIF recently announced that it will expand its global footprint by adding three additional offices in New Zealand, the Czech Republic, and Cyprus. This is an example of the benefits that can be gained from conducting such research in-house. Amir Shams, the Chief Executive Officer and Managing Director of the Group explained that the offices are being opened to expand ESG's investment activities. He says, "New projects will be developed in real estate, tourism, finance, artificial intelligence, and new technologies by offices in the Czech Republic and Cyprus, respectively. The New Zealand office will primarily emphasize new projects in environmental, social, and governance (ESG), healthcare, and green energy because these are the industries that are expanding at the quickest rate in the region."

Published on: Wednesday, August 17, 2022, 06:25 PM IST