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Arab News, Monday, Mar 13, 2023 | Sha'ban 21, 1444

​​Saudi Arabia calls for a balanced approach to ESG investment

Saudi Arabia: Amid global calls to increase environmental, social, and governance investments, asset managers and investors in Saudi Arabia want a more nuanced approach that balances ESG demand with today’s challenging economic reality, according to a Pricewaterhouse Cooper’s survey.

As per the findings of the global survey, institutions are expected to increase their ESG-related assets under management to $33.9 trillion by 2026, from $18.4 trillion in 2021.  

Environmental activists and many institutional investors are taking a hard-line stance by insisting on making investments only in ESG. However, as the survey showed due to high demand 30 percent of the investors say they struggle to find attractive ESG investment opportunities.

Saudi investors, the PwC report, said warn against basing decisions “solely on ideological investments” and caution that such an approach “could lead to the misallocation of capital,” which would negatively affect investors many of whom are allocating part of the salaries for retirement.

Saudi Arabia is taking effective measures to boost ESG and is an advocate of a diversified energy mix and environmental strategies.

Saudi Aramco, for example, has implemented an internal governance model that integrates sustainability principles into business strategy, as the oil giant aims to balance profitability, environmental protection, and the growth and prosperity of the communities in which it operates.

The Saudi Stock Exchange, meanwhile, has already issued ESG disclosure guidelines in 2021. The guidelines will help more than 200 listed companies and prospective firms looking to go public with their ESG reporting and will raise awareness about it in the local market. They will encourage companies to voluntarily disclose their ESG performance.

Last year, the Saudi Stock Exchange also launched a partnership with Saudi Arabia’s Cultural Development Fund to provide a channel through which Saudi companies can connect with and invest in cultural and heritage projects. It was part of a comprehensive plan to promote robust compliance with international and local ESG standards. 

“Despite the difference in approach and emphasis about the future of ESG investments, Saudi Arabia is committed to bringing people together to find solutions to the challenges we must confront,” the report said.

The issue of investing in ESG will be one of the hot topics for the world’s financial services community gathering in Riyadh for the second edition of the Financial Services Conference on March 15 and 16.

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