Impact investing and ESG is of increasing interest to private clients in the Middle East and “experiencing significant growth”, according to financial services provider Ocorian.
The firm said that this is due to the region undergoing a generational shift.
However, this is causing a ‘generation gap’ between family members, with next-generation private clients leading this growth in ESG investments and taking a very different approach to that of their parents or grandparents.
Ocorian said that next-gen family members are not only looking at very different types of investments, from ESG investments to crypto, but are increasingly wanting to transform their own family businesses to become true advocates of ESG and sustainability.
Rise in domestic structuring
Traditionally, families and ultra-high-net worth individuals that hold assets outside of the Middle East tend not to structure them domestically, but, for the first time, there is a significant rise in the use of foundations for domestic structuring.
As part of this, the Dubai International Financial Centre (DIFC), Abu Dhabi Global Market (ADGM) and RAK International Corporate Centre foundations regime has increased dramatically, with 550 foundations registered with Ocorian as of September 2022.
Ocorian said that this is also another generational shift, with next-gen family members becoming much more aware of the need for asset protection and financial security. There is an “increase in the awareness of the need for structuring alongside a deepening sophistication of family governance”, it added.
Also, next-gen family members also have an increasing desire to professionalise the family office. Alongside investments, family offices are now being used for protection of wealth, succession and intergenerational planning and governance.
Lynda O’Mahoney, global head of business development for private client division at Ocorian, said: “As we strengthen our commitment to the Middle East, we’re seeing a generational shift which is resulting in far-reaching changes in how private clients operate – everything from their investment outlook and a rising trend in impact investing and ESG through to how they are structured and a professionalisation of the family office.
“These new trends are very exciting but can also bring new challenges, such as making sure that investments are both achieving target returns as well as the desired ESG credentials.”