In­ter­view with Hasan Al-Jabri, CEO of SEDCO Cap­i­tal

In­ter­view with Hasan Al-Jabri, CEO of SEDCO Cap­i­tal

Middle East Business (English) - - NEWS -

As some un­eth­i­cal prac­tices re­main unchecked, there is a greater need to im­prove eth­i­cal be­hav­iour, es­pe­cially in the fi­nan­cial sec­tor. To shed more light on this is­sue, Mid­dle East Busi­ness News & Mag­a­zine's Ed­i­tor-in-Chief, Amal Daragh­meh Masri, met with Hasan AlJabri, CEO of SEDCO Cap­i­tal, dur­ing the re­cent sum­mit on Re­spon­si­ble Fi­nance and In­vest­ment in Zurich, Switzer­land.

Can you tell us a lit­tle about SEDCO Cap­i­tal?

SEDCO Cap­i­tal is one of the largest as­set man­agers in Saudi Ara­bia and one of the world’s lead­ing Shari­ah­com­pli­ant in­vestors.

What type of clients you have?

We are an as­set man­ager of choice for in­vestors who seek Shari­ah­com­pli­ant ser­vices, rang­ing from in­sti­tu­tional in­vestors to high-net worth in­di­vid­u­als. We are also wel­com­ing an in­creas­ing num­ber of clients who do not typ­i­cally in­vest in Shariah-com­pli­ant funds, but are nonethe­less at­tracted to a strong track record of re­turns and a clear com­mit­ment to re­spon­si­ble in­vest­ing.

SEDCO Cap­i­tal has re­cently launched Pru­dent Eth­i­cal In­vest­ing (PEI). Can you tell us more about that?

Pru­dent Eth­i­cal In­vest­ing is the name we have given to our new and in­no­va­tive Is­lamic in­vest­ment strat­egy. We re­alised that in­vestors were seek­ing sus­tained re­turns in a low-growth world, but also sus­tain­able out­comes with an eye on ethics. Shariah-funds com­bine both cri­te­ria and it be­came clear that Is­lamic in­vest­ing and re­spon­si­ble fi­nan­cial in­vest­ing have sig­nif­i­cant over­lap. These are two mod­els with the same laud­able goal. We de­cided to bridge the two mod­els in or­der to max­imise both our re­turns and so­cial im­pact as an as­set man­ager.

How does shariah com­pli­ance match eth­i­cal, so­cial, and gov­er­nance (ESG) in­vest­ing? How are they dif­fer­ent?

When we de­vised our model of Pru­dent Eth­i­cal In­vest­ment, we drew on the United Na­tion’s Prin­ci­ples for Re­spon­si­ble In­vest­ment (UNPRI), which were in­tro­duced in 2006 by UN Sec­re­tary Gen­eral Kofi An­nan. SEDCO Cap­i­tal was the first Shariah-com­pli­ant sig­na­tory of the UNPRI and we have al­ways had a strong cor­po­rate ethic. From our stand­point, the UNPRI calls upon tra­di­tional in­vestors to take an eth­i­cal ap­proach that Shari­ah­com­pli­ant in­vestors have al­ways taken. The one ad­van­tage of UNPRI is that it out­lines the re­spon­si­bil­i­ties of in­vest­ment with some­what more de­tail that ba­sic Shari­ah­com­pli­ance. Of course, there is a fun­da­men­tal dif­fer­ence in that Shariah-com­pli­ance is based on the so­cial re­spon­si­bil­ity at the heart of Is­lam. This re­li­gious calling is the main mo­ti­va­tor for us.

You have is­sued a re­port re­cently on PEI. What can you tell us about it?

As part of our work to adopt Pru­dent Eth­i­cal In­vest­ing, SEDCO Cap­i­tal pro­duced a white pa­per look­ing at the per­for­mance of re­spon­si­ble in­vest­ment, Is­lamic in­vest­ment and un­con­strained port­fo­lios across the US, Europe and Asian eq­uity mar­kets. The pa­per was au­thored by Chris­tian Gueckel, our Chief Risk Of­fi­cer. His ex­cel­lent re­search shows that Shariah-com­pli­ant port­fo­lios have out­per­formed un­con­strained and re­spon­si­ble in­vest­ment strate­gies over the last decade on an ab­so­lute re­turn and risk-ad­justed ba­sis across all an­a­lysed mar­kets. These find­ings have given us the con­fi­dence to bridge Shari­ah­com­pli­ance with re­spon­si­ble in­vest­ing into a sin­gle in­vest­ment strat­egy. The white pa­per has helped us demon­strate to clients why our in­vest­ment plat­form of Shariah-com­pli­ant funds should be an op­tion for any­one look­ing to pur­sue re­spon­si­ble in­vest­ment.

Can you give us con­crete ex­am­ples of how you help your clients in­vest eth­i­cally, re­spon­si­bly, and there­fore, com­pli­ant with Shariah?

Re­cently, an as­set man­ager much larger than SEDCO ap­proached us to seek a co-in­vest­ment in a forestry project, which was pre­sented to SEDCO as be­ing Shariah-com­pli­ant. When we re­sponded that we have a new pol­icy of Pru­dent Eth­i­cal In­vest­ing that goes be­yond sim­ple Shari­ah­com­pli­ance, re­quir­ing ad­di­tional as­sur­ances around en­vi­ron­men­tal pro­tec­tion and the treat­ment of lo­cal pop­u­la­tions, the po­ten­tial part­ner ini­tially baulked. But upon fur­ther re­view by the in­vest­ment com­mit­tee, the larger as­set man­ager re­con­sid­ered their ap­proach, agree­ing with the merit of SEDCO's PEI strat­egy, not only for the in­vest­ment at hand, but as a po­ten­tial new port­fo­lio-wide re­quire­ment. For us, this was a ma­jor val­i­da­tion of our com­mit­ment. We now see PEI as a way to drive our busi­ness for­ward with new part­ners and new projects, bring­ing bet­ter out­comes to clients.

How do mea­sure the im­pact of the work you do with your clients?

Our shift to PEI was all about mak­ing it eas­ier for clients to mea­sure the im­pact of their in­vest­ments. PEI stresses the im­por­tance of due dili­gence and trans­parency of in­vest­ment struc­tures. We want clients to be able to see the un­der­ly­ing as­sets and to know ex­actly how their in­vest­ment gen­er­ates re­turns. But im­por­tantly, we also seek to mea­sure en­vi­ron­men­tal, so­cial, and gov­er­nance out­comes. There­fore, the idea of im­pact be­comes holis­tic. It is not just about achiev­ing re­turns, but about how we achieve re­turns and what other so­cially re­spon­si­ble out­comes we can pro­mote. We feel this ap­proach to the idea of im­pact is a kind of global re­flec­tion of the ideas at the cen­tre of Is­lamic in­vest­ing. It is very im­por­tant to the team at SEDCO Cap­i­tal that we con­tinue to lead in this space.

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