High-net-worth Middle East investors' are showing a strong shift to sustainable investment and Islamic Finance, according to Lombard Odier's new Middle East survey on value-driven investments.
85% of the surveyed 300 HNW investors in the Middle East intend to increase their exposure to ESG or sustainable investments in the future., it founds.
81% already take sustainability and ESG into account when making investment decisions.
72% of investors in the region believe that they can generate improved returns through ESG investments.
At present, sustainable investments account for 33% of investment portfolios; investors forecast that this will increase to 52% in the next five years.
There was also strong momentum for Shariah finance strategies - Sukuks and Islamic loans are the two most favoured Shariah-compliant asset classes in the region, with 39% and 38% interested in holding these assets respectively.
67% of investors said that observing Islamic investment principles in their investments is important to them, while only 4% of investors said that they are not interested in Islamic investments.
The survey revealed that Shariah investing is also important to younger investors, with 54% of 18-40 year-olds investing accordingly for some of their assets.
This is reinforced by the larger Shariah-compliant asset allocation among the younger generation, who allocate on average 52% to Shariah investments vs 48% for those aged 40 and upwards. This is expected to increase to 60% in the next five years for younger investors, compared to 56% for older investors.
Speaking on the rationale behind the rising interest in Islamic and sustainable investments in the previous 12 months, one younger Middle Eastern investor added:
"Being an ethical and responsible investor with Islamic values, our interest in Islamic finance and sustainable investment has grown naturally. We have always avoided high-risk investments, and by aligning ourselves to Islamic finance, we continue to follow our investment strategy very well."
Arnaud Leclercq, Partner Holding Privé and Head of New Markets at Lombard Odier, said: "The results of our survey are very encouraging, demonstrating that HNW investors have already taken steps to integrate their Islamic beliefs via Shariah-compliant strategies, and want to learn more about investing sustainably.
"Investors also plan to increase those allocations, illustrating a growing awareness that they can play an important role in driving positive social and environmental change. Lombard Odier is an acknowledged leader and has developed unique performance strategies in this field."