Investments adhering to environmental, social and governance (ESG) criteria are capturing increasing interest in the Middle East. A 2020 survey carried out by multinational bank HSBC revealed that 41% of regional investors wished to adopt an effective ESG investment policy. A May 2022 PWC report confirmed this trend, adding that Middle Eastern companies' top three sustainability priorities are diversity and equality, climate change and safety.

The region has long lagged in ESG investments. For example, in the Gulf Cooperation Council (GCC) countries, an economic model highly reliant on non-renewable energy exports has limited interest in ESG practices, especially environmental ones. However, in recent years, Saudi Arabia and the United Arab Emirates have been leading the way in matters of sustainable development, devising national plans to overcome hydrocarbons dependence, increase the share of renewable resources in their energy mix and boost the private sector.

Alena Dique is the founder of ESG Insights Middle East, a regional ESG databank. She told Al-Monitor, "ESG investments in the Middle East have boomed since the pandemic, and this trend will probably remain popular until 2030. Social investing is largely pushed forward by investors who want long-lasting, sustainable contributions left behind as their legacy. At the same time, environmental investments present a huge opportunity for the Middle East, especially with the region hosting both COP27 and 28. However, there is still a long way to go regarding the governance aspect, even though the Middle East is no stranger to responsible investing, ethical practices or sharia-compliant strategies."

In addition to the ethical aspects, many Middle Eastern investors consider sustainable assets attractive from an economic perspective. A recent GIB asset management report highlights that ESG-compliant investments generally have higher long-term profits. "This is difficult to evaluate as ESG is both qualitative and quantitative. We need to look at how investors choose to assess ESG risk and what areas they look to emphasize. ESG rating might not evaluate all companies the same way or give a true depiction of return on investment all the time. Still, there is no denying that sustainability evaluation exists and can impact the flow of investments," Dique added.