Waqas Samad, CEO of FTSE Russell, addressing the Smart Sustainability Forum. Pic: Salim Matramkot/The Peninsula
GCC investors are showing growing appetite for ESG incorporation in capital allocation and portfolio management. In Qatar, to support the growth of sustainable capital flows, many listed companies are increasingly integrating environmental, social and governance (ESG) factors in the investment allocation, Waqas Samad , CEO of FTSE Russell and director of the information services division at London Stock Exchange Group, said yesterday.
Delivering the opening speech at ‘Smart Sustainability Forum’, jointly organised by QSE and FTSE Russell, Samad said FTSE Russell seeks to influence, support and enable capital market stakeholders to better incorporate ESG into their investment practices.
“GCC market is making great progress in incorporation of ESG among Emerging Markets. It’s a journey, it will take time and many markets help to upscale the standards and helping the development of market with continuing to engage with the market participants.. The FTSE Russell can help companies to encourage incorporate climate change risk considerations into fixed income portfolios like government bonds.”
Samad said climate change is expected to have profound impacts on the prospects and performance of companies across a variety of industrial sectors. Many investors now regard climate change as an investment issue. In portfolio design, investors increasingly want to hedge climate risks and gain exposure to upside that climate change may bring to companies.
He said a survey conducted by FTSE Russell in 2017 was surprised to find that the degree to which ESG was being considered an option to accompany smart beta indexation. Over 40 percent of asset owners using or evaluating smart beta said they were looking to apply ESG considerations to a smart beta strategy. Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization-based indices.
A 2019 deeper survey, conducted again by FTSE Russell, found a regional differences within Europe and North America with 77 percent of European asset owners expressed interest in applying ESG considerations to smart beta which was up from 55 percent last years.
Appetite for ESG & smart beta is higher among larger funds, with 58 percent of larger funds looking to increase their allocation over the coming years. Only 4 percent of larger funds did not think they would increase allocations to ESG and smart beta.
Samad explained how the global markets are moving from active investments to passive investments and ESG, another strong trend picking up in the global investment space. ETF markets are growing at significant rate, showing how passive investments grown to over $5 trillion in AuM globally.
A panel discussion on “ESG, Passive Investments, Factor Investments” was held on the sidelines of the Forum. Waqas Samad; Richard Hirst, Head of Sustainability, QNB; Akber Khan, Senior Director, Al Rayan Investment; Fahmi Alghussein, CEO, Aventicum; and Mohsin Mujtaba, Director, Product & Market Development, QSE participated in the panel discussion.
