The green fix

Why sustainable investments should be more widespread in the Middle East

Emerging from the fiscal stimulus of Covid19, a volatile shakeout awaits the global business landscape. The impact of an abrupt end to vast borrowing is considerable, but with it come opportunities to build inclusive economies by ‘fixing’ the world’s imperfect markets. These are laid out in the new Global Risk

Report from the World Economic Forum in partnership with Marsh McLennan.

The report points to the enormously democratising power of the much-vaunted and Covid-expedited digital transformation – giving rise to new business ecosystems, creative capital, leveling up opportunities, and closing digital divides in developing markets.

To thrive and grow, micro-, small- and mediumsized enterprises (MSMEs) must turn to new funding alternatives to source capital. The good news is that the world economy remains in a protracted period of hyper-low interest rates. Borrowing is cheap for the time being – and low rates push investors and VCs to look for alternative avenues for capital returns. One such route is the fast-emerging sector of sustainable investment.

GREEN THINKING

Climate experts have identified an opportunity for policymakers to consider what can be achieved if only a tiny fraction of those vast Covid-19 fiscal stimulus packages was invested annually in a ‘climate-positive’ recovery. The rationale is simple: if trillions could be found for Covid, why not for the climate emergency? How much could MEA countries set aside? What are the growth opportunities for regional businesses better able to embrace a more resilient and sustainable approach?

The numbers suggest that there could be room for a strategic pivot towards green investment. The UAE’s stimulus package totaled $107bn as of February 2021 (and counting), whilst as early as April 2020, Saudi Arabia earmarked $31.9bn for a pandemic stimulus package. A fraction of this could go a long way to stimulating private sector green innovation.

It’s a sector that also boosts diversification – a critical dynamic in an age of oil price volatility. On March 31, 2021, Saudi Arabia announced plans to pump investments worth $3.2 trillion into the national economy by 2030.

But those strategies have to secure a reasonable return on investment – which is why government financial institutions that are pumping billions of dollars into GCC economies should utilise the digital transformation to get their monies’ worth. Procurement and digital enterprise platforms can ensure that government financial institutions get value for money and that economic development is more inclusive – with metrics across multiple areas of importance like the transference of skills and best practice.

MULTISTAKEHOLDER CAPITALISM

A focus on skills is especially important – more than ever, agile economies need nimble workforces. Physical space and organisational design must adapt to hybrid working as employees transition into new roles and navigate the opportunities of automation and digitalisation – without reinforcing the systemic inequalities laid bare by Covid-19.

Of course, these are lofty goals and not easy to achieve. But many imperfections can be ironed out through a sharp, focused management of liquidity and an understanding of the long-term and highly sustainable nature of a greener, more inclusive economic model – one with conditional fiscal support mechanisms that force private companies to add value by boosting productivity and economic sustainability.