RIYADH: Transition investment could be the linchpin in the UAE’s efforts to meet the global funding gap of $4.3 trillion per year to achieve the UN Sustainable Development Goals by 2030, a research report indicated.
New York University Abu Dhabi’s Transition Investment Lab in its annual report suggested that the UAE’s institutional investors should focus on transition investment — a strategy aimed at achieving socioeconomic impact along with financial returns — to overcome the funding gaps.
While emerging markets have an estimated $30 trillion SDG financing gap for the next seven years, the report noted that it represents less than 6 percent of the global private capital, adding that the UAE with its special access to these markets could be key in bridging this gap.
The report noted that long-term institutional investors, particularly sovereign wealth funds, have a crucial role to play in driving sustainable change.
This comes as the Middle Eastern wealth funds accounted for 19 percent of the total sustainable investment deal value during the period between 2020 and 2022.
“At the core of TIL’s beliefs is the notion that long-term institutional investors play a pivotal role in driving change, and sovereign wealth funds rank high in this echelon due to the vast size of their assets,” TIL Executive Director Bernardo Bortolotti said.
However, the report highlighted that a significant challenge facing institutional investors is the lack of high-quality data demonstrating the effectiveness of impact investment interventions.
To address this, TIL has developed the Signature Impact Framework, a methodology to measure and denote a business’s precise contribution to societal welfare.
Mubadala, a key partner of TIL, has also underlined the importance of data in making informed investment decisions, as it is working toward improving the availability of climate data in private markets.
“We have been working with our partners at the One Planet Sovereign Wealth Fund network to improve the availability of climate data in private markets,” Derek Rozycki, head of responsible investing at Mubadala, said.
The report was launched during the Transition Investment workshop, an event attended by financial institutions, asset managers, researchers, and policymakers. The event agenda was aligned with the upcoming COP28, which will be hosted by the UAE.