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Navigating an ethical and sustainable path to a fairer world

Environmental, Social, and Governance factors are becoming crucial in corporate investment decisions that create long-term financial and social benefits.

12 December 2024
Hand holding planet earth

Environmental, Social, and Governance (ESG) has emerged as a major driving force in asset allocation decision-making.

Environmental, Social, and Governance (ESG) has emerged as a major driving force in asset allocation decision-making. ESG assets are projected to reach $50 trillion by 2025, constituting over a third of the estimated $140.5 trillion in total global assets under management.

Literature on ESG is evolving rapidly, for example Alex Edman argues that ESG holds significant importance yet is not uniquely exceptional and that companies should not be praised solely for enhancing their ESG performance, neglecting other intangible assets that generate long-term financial and social returns.

Although ESG investing may have positive societal impacts, it does not necessarily lead to higher returns for investors. However, as polarisation regarding ESG grows, stakeholders with differing and sometimes conflicting ideologies and interests engage in debates over its relevance and impact.

There is heated discussion around seven commonly accepted myths surrounding ESG, revealing that many lack empirical evidence. Alex Edman proposed a significant shift in the practice of ESG to the informed creation of long-term value, namely Rational Sustainability.

Although ESG investing may have positive societal impacts, it does not necessarily lead to higher returns for investors. However, as polarisation regarding ESG grows, stakeholders with differing and sometimes conflicting ideologies and interests engage in debates over its relevance and impact.

Hisham Farag, Professor of Finance - University of Birmingham.

As a contribution to the debate on the development of ESG in the wake of COP29, the Sustainable Financial Innovation Research Centre, SfiC at the University of Birmingham organised its annual conference in our campus in Dubai. Sponsored by the European Financial Management Association, Securities & Commodities Authority and UAE-UK Business Council, the conference took place from 29 November to 1 December. Professor Yusra Mouzughi, Provost, University of Birmingham Dubai and Bradley Jones, Executive Director, UAE- UK Business Council, opened the event.

Research in SfiC prioritises engagement with policy makers and the conference hosted a panel discussion on Private Wealth and Sustainable & Impact Investment. Panellists included Bradley Jones, Silvina Bruggia, Director, Sustainable Finance - Emerging Markets, Data & Analytics, London Stock Exchange Group (LSEG); Heba Al Emara, Managing Director, Vistra, and Hisham Farag, SfiC, Director.

Discussion centred on the recommendations of a report advising government, business and academia on how to foster stronger bilateral cooperation in addressing the risks and challenges of embedding ESG in private wealth portfolios.

The report recommends that the UAE and UK:

  • Share knowledge and expertise to increase awareness of the opportunities and potential risks
  • Work together to foster collaboration between finance, industry, government, and academic institutions in sharing best practice in implementing the ISSB standards globally.
  • Collaborate in developing a regulatory framework to regulate and audit ESG-related claims by businesses.
  • Partner to enhance Shari’ah compliant solutions for the inheritors of family wealth in the UAE as they shift their wealth portfolio to more sustainability and impact-oriented investments.
  • Create a forum for sharing best practice and enhancing due diligence in addressing the challenges of succession planning in the private wealth industry.

There was a great deal of debate around the value of bilateral collaboration in strengthening the frameworks for measuring sustainable and impact investment, as well as discussion around knowledge sharing in addressing and understanding changing cultural and intergenerational attitudes to private wealth and sustainable investment.

Mr. Mohammad Junaid Essa, Head of Corporate Governance and Sustainability at the Securities and Commodoties Authority (SCA), the financial regulator in the UAE, addressed the conference on the development of ESG in the UAE. Mr. Junaid highlighted the role of SCA in developing corporate governance in the UAE – for example, the initiative to encourage gender diversity in corporate boards by which listed companies are required to have at least one female director.

Mr. Junaid also discussed the carbon trading market and how the SCA will be issuing the licensing requirements for the trading platforms. Moreover, Mr Junaid outlined the UAE Strategic Initiative and how it incorporates Green Agenda 2015-2030, National Climate Change Plan of the UAE 2017-2050, and UAE Net Zero by 2050.

Professor Lemma W. Senbet, the Dean's Chaired Professor at the University of Maryland, USA, delivered the conference keynote speech titled “Social priorities and Finance: The Role of Institutions’.

Finally, 40 research contributions by academics around the world have been presented on important policy related topics such as the future of COPs; companies’ commitment to ESG pillars; and the future development and challenges of ESG.

Featured staff

  • Professor Hisham Farag

    Business School Director of Research

    Hisham Farag is Professor of Finance and Director of Research at Birmingham Business School. He is also the Founding Director of the Sustainable Financial Innovation Research Centre (SFIC).

    Phone: +44 (0)121 414 3101
    Email: h.farag@bham.ac.uk

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