ESG drives wealth management growth in MENA region

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Environmental, Social and Governance-focused products is the most important factor in driving wealth management growth across the MENA region, study finds.

The research by behavioural finance experts Oxford Risk said ESG has become a key factor for investment providers and advisers in the Middle East and North Africa (MENA) region.

Researchers interviewed independent financial advisers and wealth managers in the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Oman, Egypt, and Kuwait who collectively manage assets of around £250 billion.

The study found 75% of wealth managers said ESG is already well-established as a factor behind the launch of new solutions.

Around nine of out 10 (90%) of wealth managers say it will become even more important for the design of new products over the next three years while 90% say it will become a more significant consideration for investors when choosing products.

Oxford Risk’s ESG suitability framework for wealth managers focuses on asking their clients how much ESG should an investor be encouraged to have in their portfolio.

And how far down the impact spectrum should components be selected which is akin to high level asset allocation.

The study also examines instrument selection to meet asset allocation and looks at ongoing investor management and the tailored behavioural messages to use.

The launch of more ESG-focused products is the most important factor in driving growth in wealth management across the MENA region along with improved technology, new research* for behavioural finance experts Oxford Risk shows.

Its study with independent financial advisers and wealth managers in MENA who collectively manage assets of around  $290bn, found three out of four (75%) believe access to more ESG products will help them expand the most over the next three years.

Better technology will be the biggest influence on growth, the research with wealth managers in the United Arab Emirates,  Saudi Arabia, Bahrain, Qatar, Oman, Egypt, and Kuwait, found, with 91% of advisers citing it.

However, the importance of ESG to both investment providers in the region and advisers is growing, the study found, with 75% of wealth managers saying it is already well-established as a factor behind the launch of new solutions.

Around nine of out 10 (90%) of wealth managers say it will become even more important for the design of new products over the next three years while 90% say it will become a more significant consideration for investors when choosing products.

Oxford Risk’s ESG suitability framework for wealth managers focuses on asking their clients how much ESG should an investor be encouraged to have in their portfolio and how far down the impact spectrum should components be selected which is akin to high level asset allocation.

It also examines instrument selection to meet asset allocation and looks at ongoing investor management and the tailored behavioural messages to use.

Oxford Risk head of behavioural finance Greg B Davies said: “The importance of ESG in wealth management is well-established and companies which do not demonstrate a commitment to and focus on ESG investing will lose clients.

“Wealth managers who have the credentials and expertise will benefit as putting cash into new investments will greatly favour strong ESG propositions.

“That shouldn’t mean just paying lip service to ESG but making use of technology to grasp the opportunities and meeting the responsibilities of matching socially-minded investors to suitable ESG investments.”

Oxford Risk said it research showed that most investors want the emotional comfort that ESG investments do what they claim to do and seek independent parties they can trust to verify those claims.

It added that the onus is on wealth advisers to match suitable ESG solutions to individual preferences.

Oxford Risk was founded in 2002 by behavioural academics from Oxford University who uses behavioural finance expertise and technology to help clients deliver superior advice and service more efficiently.

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