Fuelled by the pandemic, growing environmental, social, and governance (ESG) priorities are accelerating demand for ethical and sustainable investment products that offer attractive risk-adjusted returns, according to Samer Abu Aker, CEO of SEDCO Capital, in an exclusive interview with Arabian Business.
“In today’s global investment climate, characterised by an uneven recovery from the Covid-19 pandemic, our clients want the confidence that their capital is being deployed into high-performing, stable, ethical, and sustainable assets,” he said.
The global Shariah-compliant asset management firm recently launched its SC LO Global ESG Equities Fund, a unique ESG-focused and Shariah-compliant fund, in partnership with Lombard Odier, the Swiss private banking and asset management group.
The fund aims to deliver capital growth through an active asset allocation strategy and careful risk management, with the goal of outperforming the Dow Jones Islamic Market World Developed Total Return Index.
It will employ a multi-factor approach that aligns Shariah-compliant, responsible investment, and sustainability principles to construct a portfolio with a high ESG score.
“The SC LO Global ESG Equities Fund convenes SEDCO Capital’s emphasis on Shariah-compliance and responsible investment principles with Lombard Odier’s time-tested heritage of pioneering sustainable investment solutions,” said Abu Aker.
According to the Global Sustainable Review 2021, more than a third of funds under management in the world in 2020 were in sustainable-based investments, having risen 15 percent over the past two years to be worth $35 trillion worldwide.
“We believe that the SC LO Global ESG Equities Fund is well-placed to garner significant investor traction, both regionally and globally,” said Abu Aker.
Abu Aker also believed that the generational shift in investors is fuelling the demand for this type of fund, stating: “We are excited to see millennials and Gen-Z at the forefront of driving enthusiasm and demand for ethical investing worldwide…young investors want financial returns that come with positive social and environmental impact.”
Samer Abu Aker, CEO of SEDCO Capital.
As of September 2021, the SC Global Sustainable Equity Fund and SC Europe Equities Fund have outperformed the MSCI Europe Index and MSCI World Index by 7.3 percent and 3.25 percent, respectively.
“It is SEDCO Capital’s view that investments in opportunities that take into account climate transition and physical risks will deliver above-average returns. Such opportunities may revolve around clean energy, energy efficient infrastructure, and clean transportation,” he said.
“That same sustainable investment mind set can be applied across a variety of sectors because that is where the world’s focus is shifting. And, fortunately, it just so happens to be ethically led.”
SEDCO Capital has a robust track record for managing ESG-focused funds, having been awarded the highest possible rating in 2020 by the UN-supported Principles for Responsible Investment (PRI) in recognition of its approach to responsible investing and integrating ESG factors into its investment solutions.
On the convergence of ESG and Shariah-compliant investment approaches, Abu Aker said: “The two investment approaches are united under the spirit of ethical investing, because fundamentally they both consider their impact on the welfare of society, the environment, and the sustainability of value-creating participants in an economy.”
SC LO Global ESG Equities Fund is well-placed to garner significant investor traction, both regionally and globally.
The demand for Islamic banking is rising rapidly in the Middle East and globally, with the sector projected to reach $3.8tr by 2023, fuelled by the increasing shift in customers’ preference for social responsibility.
“In addition to conventional finance exclusions, Shariah-compliant investments also focus on the financial health of balance sheets by considering factors such as leverage, cash, interest-bearing securities, and the ratio of accounts receivable to market cap (or total assets) in their decision-making process.”
“The increasing global focus on ESG is a welcome one from our perspective, as we believe it provides an additional layer of ethical screening to ensure that a potential investment is value-adding to the environment and society and is governed justly and fairly to ensure its sustainability,” he emphasised.
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