RIYADH: Transition investment could play a vital role in the UAE’s efforts to address the global funding gap of $4.3 trillion per year required to achieve the United Nations Sustainable Development Goals (SDGs) by 2030, according to a research report.
The annual report from New York University Abu Dhabi’s Transition Investment Lab (TIL) suggests that the UAE’s institutional investors should focus on transition investment, which aims to generate socio-economic impact alongside financial returns, in order to overcome the funding gaps.
While emerging markets face an estimated $30 trillion SDG financing gap over the next seven years, the report highlights that this represents less than 6 percent of global private capital.
UAE’s Potential in Bridging Funding Gap
The UAE, with its unique access to these markets, has the potential to play a key role in bridging this gap. Long-term institutional investors, particularly sovereign wealth funds, are identified as having a crucial role in driving sustainable change.
Middle Eastern wealth funds accounted for 19 percent of the total sustainable investment deal value between 2020 and 2022, underscoring their importance in driving positive impact. Bernardo Bortolotti, TIL Executive Director, emphasized the pivotal role of long-term institutional investors, especially sovereign wealth funds, due to the significant size of their assets.
However, the report also highlights a major challenge faced by institutional investors: 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 that measures and assesses a business’s precise contribution to societal welfare.
Mubadala, a key partner of TIL, has stressed the importance of data in making informed investment decisions and is working to enhance the availability of climate data in private markets. Derek Rozycki, Head of Responsible Investing at Mubadala, stated that they are collaborating with partners at the One Planet Sovereign Wealth Fund network to improve the availability of climate data in private markets.
The report was launched during the Transition Investment workshop, attended by financial institutions, asset managers, researchers, and policymakers. The event’s agenda is aligned with the upcoming COP28, which will be hosted by the UAE.
