ABU DHABI // Many businesses in the Middle East are putting economic prosperity at risk by not taking major threats to the environment seriously enough, climate experts warn.
Water conservation, waste management and climate change are regarded as the top three environmental concerns in the region, a survey of 106 businesses revealed.
Yet 42 per cent of respondents in the online study, carried out in October, said they were "not really" addressing the issues, and 48 per cent said they were "not applicable".
"Given current predictions for the region in relation to water scarcity and climate change, this is an alarming result," said the Sustainability Advisory Group (SAG), an international alliance of experts that conducted the survey.
"There is a significant amount of work ahead for public policy leaders and scientists to encourage businesses to appreciate the full scope of the impacts of climate change and water scarcity on economic prosperity and business opportunity," the group said.
"The results could indicate that a number of regional businesses are not yet fully prepared to deal with the shifting business context."
Dr Mohammed Raouf, the manager of the environment programme at the Gulf Research Centre, said he was not surprised by the survey data.
"The results represent the Middle East; the awareness of stakeholders here is not as high as in the West. The economic crisis is also affecting the situation," he said.
He suggested that governments might consider economic incentives to encourage a shift towards better environmental practices among the region's business community.
The survey targeted business decision-makers in a variety of fields including management consulting, banking, communications, construction, energy and real estate.
Almost 60 per cent of the businesses surveyed were based in the UAE, with the remainder from Saudi Arabia, Jordan, Oman, the Palestinian Authority and Qatar. A total of 30 per cent were multinational companies, 42 per cent were large national or regional firms, with the remainder being small or medium enterprises.
Maria Sillanpaa, the founding director of SAG, said addressing water conservation, waste management and climate change required the involvement of all sectors of society.
"Obviously, these three issues are differently significant in different sectors," she said. "However, they now need to be considered as everybody's business if we are to tackle them effectively in the Middle East and elsewhere.
"This is not only [important] for environmental conservation reasons, but also for managing the increasing direct and indirect costs associated with them."
The UAE is one of the biggest per capita consumers of water, and one of the largest generators of waste, in the world.
In Abu Dhabi, groundwater reserves that can be accessed easily have been projected to run out within 20 to 40 years, according to the Abu Dhabi Water Master Plan, which was developed by the Environment Agency-Abu Dhabi (EAD) last year.
EAD's latest figures, from 2006, show groundwater makes up 71 per cent of total supply, followed by desalinated water at 24 per cent and treated wastewater at five per cent.
In addition, the desalination industry has been growing so rapidly that the amount of gas needed to power it is projected to exceed local supply levels by 2015.
Meanwhile, most of the UAE's waste ends up in landfill sites where it emits large amounts of the greenhouse gas methane. Many of the sites are also leaching dangerous chemicals into the soil and groundwater.
Climate change is forecast to cause the region to become hotter and drier over the next 25 years, further exacerbating water scarcity.
Gayatri Raghwa, an environmental education specialist at the EAD, said awareness of climate change was increasing in the emirate, albeit slowly. In August, the agency commissioned its own environmental survey
Of the respondents, 21 per cent of companies said they had water-saving initiatives in place and 42 per cent had implemented power-saving policies.
A total of 40 per cent were actively reducing office paper use, while 18 per cent had customer awareness initiatives focusing on environmental issues.
Both Dr Raouf and Mrs Raghwa said improving the environmental performance of businesses was linked to improving awareness of the issues in society as a whole.
And this, they said, was as much about morals as it was about laws and incentives.
One way to change perceptions, especially when it came to Muslims, was to utilise Islamic teachings, Mrs Raghwa said.
"Islam puts big emphasis on conserving natural resources. We should use the power of religion," she said. "It will have a major effect because people are very religious here. If people believe in something, they will do it no matter what."
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Cape Town Sevens on Saturday and Sunday: Pools A – South Africa, Kenya, France, Russia; B – New Zealand, Australia, Spain, United States; C – England, Scotland, Argentina, Uganda; D – Fiji, Samoa, Canada, Wales
HSBC World Sevens Series standing after first leg in Dubai 1 South Africa; 2 New Zealand; 3 England; 4 Fiji; 5 Australia; 6 Samoa; 7 Kenya; 8 Scotland; 9 France; 10 Spain; 11 Argentina; 12 Canada; 13 Wales; 14 Uganda; 15 United States; 16 Russia
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Saturday
Crystal Palace 1 Brighton & Hove Albion 2
Cardiff City 2 West Ham United 0
Huddersfield Town 0 Bournemouth 2
Leicester City 3 Fulham 1
Newcastle United 3 Everton 2
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Sunday
Liverpool 4 Burnley 2
Chelsea 1 Wolverhampton Wanderers 1
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Europe’s rearming plan
- Suspend strict budget rules to allow member countries to step up defence spending
- Create new "instrument" providing €150 billion of loans to member countries for defence investment
- Use the existing EU budget to direct more funds towards defence-related investment
- Engage the bloc's European Investment Bank to drop limits on lending to defence firms
- Create a savings and investments union to help companies access capital
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Age 26
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