In excess of half of the UAE investors assume the sustainable investments to outclass the conventional ones. Investments within the Environment, Society as well as the Governance (ESG) are on the upsurge globally, and the UAE is pioneering that swing in the territory via its start-ups.
Ramesh Jagannathan, Managing director of StartAD, Abu Dhabi-based global accelerator stated that: “The freshly revised commercial law regarding foreign ownership for the private companies and the bankruptcy law are both “positive steps” to place the UAE as the territories hub for conscious investments. Conscious investments, or investments within the ESG, is shifting the face of capitalism as corporates are realising “they have a huge social responsibility in their pathway they make their products and services.”
Jagannathan discussed further “the UAE’s budding drive for angel investments (wherein the individuals offer capital for a business start-up) and the role of the StartAD is playing to place Abu Dhabi as a pioneer within the ESG investments.
Are they viewing a surge in conscious investments in the UAE?
It’s unquestionably a huge prospect at this moment. A latest global study created that around 93 percent of UAE investors believe they’re not compromising their investment performance by selecting an ESG or sustainable investment; that’s in contrast to a global average of 82 percent. As well as 66 percent of UAE investors expected a sustainable investment for outperforming its conventional investments.
So, while the investment within this space in the UAE is minor right now, the thoughtful process there is that the opportunity is huge.
Why do you think the UAE is more open to conscious investment than other parts of the world?
- Unconstrained capitalism has been around for a while within the circuit of the Western world since post the World War II and it has commanded to legacy thinking (outdated thinking, strategies and actions that no longer serve the way they once did) amidst the established corporations, even when it comes to doing social good.
- They are not stating that these firms are not respectable, but they are like a huge ship that needs to transform its direction; it will take time. Meanwhile, the UAE is a young nation and it doesn’t have those heritage issues so it is easier here for adaption and growth.
- The wind is everchanging towards investments in ESG and companies in the UAE can easily follow it.
What is the role that angel investors play in conscious investments?
In start-ups, institutional investors like venture capitalists don’t come in until a future stage because the valuation is still a slight gloomy at the beginning. So, this is where the angel investors step in and this is where they play a core role in conscious investments.
Usually they are previously successful entrepreneurs in their region who are able to take the risk because they understand what works and what doesn’t.
The UAE is an emerging ecosystem so we don’t have that many successful entrepreneurs here; that’s why we run Angel Rising and the Conscious Investment Fellowship to teach them the latest trends in angel investing.
Abu Dhabi has the highest per capita potential angel wealth in the world because it has oil wealth but we need to teach them the mechanics. So, for us, all the vital ingredients for a principal recipe are here; we just need to twitch it off and have a long-term plan.
What are the main elements of this long-term plan?
- First of all, there is the front-end, where StartAD’s investment fellowship comes in again. This is where we put the assumed leadership framework in place and transported global minds to this region to talk about conscious investing.
- The other end is the private sector: we require to get the appointment of all the key private companies in the province to actually participate with us in this change and transfer towards conscious investing.
- The government has to work with us closely in setting the regulatory policies. I also think it’s not just the UAE Government, nevertheless, we need to prime the way in bringing other governments like China and India into the fold, specifically now that China has the latest digital Silk Road Initiative.
What part will StartAD show in this?
The entry into the MENA market is not standardized. It’s not like in the US where if you want to enter the US market, you can form a company in Delaware, which would address the requirements of all US consumers.
In the MENA region, you can get the UAE but getting Jordan or Egypt is diverse. So, we see StartAD as the entry point where we understand the heterogeneity of the market in the MENA and Africa and we can create that pipeline.
What do you think would stimulate the private sector to participate within these efforts?
They will be manufacturing money. Like I said before, the majority of the UAE investors feel they are not compromising on the return on investment by doing this.I think the government can also assist in de-risking the process so, that the investors feel more comfortable.
Abu Dhabi Investment Office (ADIO) is a good illustration of that, where they are underwriting some of the R&D expenses of roughly businesses that make products in the ESG space.
What role do women show in the angel investors’ space, and precisely women from the territory?
60 percent of angel investors in the MENA territory are women, while the global average is at 20 percent, so there is a noteworthy participation of women investors in the space.
For us, the roadmap to make shift is not to be prescriptive. I come from the US, which is very advanced when it comes to start-ups, but one thing that is a little bit concerning to me is that it tends to be very prescriptive in that they try to tell the world how to live and how to do things.
So, for me, women investors are very vital as women have been neglected for so long that they are not strict. If you encourage and empower women to be the slice of this transformation, it will automatically happen since they are not going to be prescriptive.
That’s why it’s central to have females on board seats because they essentially penetrate the whole landscape so as in, they bring assortment of thought and the transformation then happens from the ground up.
Do you view in the latest announced revisions to the commercial law and foreign ownership as a positive transfer for start-ups? What are its consequences on young industries?
Yes absolutely, that required to happen. The same thing is going back to the bankruptcy laws. Ten years ago, we did not have any bankruptcy law so that was very troublesome because, in start-ups, let-downs are a common norm. These are all positive steps and, actually, it’s up-to-the-minute very rapidly.
He further stated that he is also part of an economic policy working group in Abu Dhabi where they are viewing in carefully how to remove asymmetries between the public sector, the private sector and the educational sector. They are observing at how to create policies that are delicate to all three sectors which play a significant role.