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Investing For Impact In The Middle East Impact investing focuses on investment choices that generate measurable social and environmental impact while achieving financial returns.

By Dr. Caroline Anstey

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Business can no longer consider social and environmental issues as purely moral considerations. Natural resources are becoming scarce, populations are growing and value chains are becoming ever more complex. Businesses realized some time ago that they need to deal with these issues as a way of minimizing negative effects on their operations. More recently, however, businesses and investors have also begun to look at the opportunities inherent in solutions that can generate both a financial and a social return.

This approach is reflected in the investment style called "impact investing." Impact investing focuses on investment choices that generate measurable social and environmental impact while achieving financial returns. The niche market of impact investing is growing fast. Examples include community investing, variants of microfinance, as well as private equity-like deals investing in sectors such as education, healthcare, basic infrastructure and clean energy. Significantly, impact investing also offers an opportunity to reach mainstream investors who, unlike traditional philanthropists, are looking for a financial as well as a social return.

So is impact investing relevant for the Middle East? The answer is yes. In the GCC, the population is young and fast growing. This combined with a set of challenges, like increasing youth unemployment rates due to fewer public sector jobs and a need for economies to diversify away from hydrocarbons, means that the environment for impact investing is set.

The impact investment landscape in the region is peppered by hubs of activity- entrepreneurial communities within cities like Dubai, Beirut, Amman, and Ramallah. With over a third of startups in the Middle East run by women –a higher percentage than in Silicon Valley- this is a region ripe for investment. Initiatives like Arabreneur, which engages young entrepreneurs in Arabic-speaking countries through an incubator model, provide a co-working and networking space, and offer a mentoring program that can ultimately result in investment. Some of these have also caught the attention of the German government's development arm and international start-up challenge Seedstars World.

Another example is Unmah Wide, a digital media startup focused on stories and cultures that transcend the global borders and boundaries of the Muslim community. The platform publishes aesthetically attractive digital content and print publications, video, and audio content to connect people and tell stories. One recent story discussed the resurrection of the Yemeni coffee industry (which, according to some accounts, preceded even that of Ethiopia), which helped catalyze buyers from European and North American markets seeking these exclusive beans.

Among our clients, we are seeing an even stronger interest in societal issues, together with a growing desire to use wealth to help address these issues. This is why we have set up UBS and Society, a cross-divisional umbrella platform designed to harness the powerful combination of our firm's global capabilities, our activities in sustainable investing and philanthropy, our environmental and social policies, and our community interaction to generate long-term, sustainable and measurable benefits for our clients and our communities.

While success stories exist, the impact investment market in the MENA region is still in its infancy. The political conflicts affecting large parts of the region will inhibit investment opportunities for now, and for some time to come. But there are still many positives for impact investing. The widespread adoption of social media has given many a platform to exchange views and ideas, which, in turn, will contribute to a more vibrant entrepreneurial scene- good news for impact investors.

Dr. Caroline Anstey

Group Managing Director and Global Head, UBS and Society

Dr. Caroline Anstey is Group Managing Director and Global Head, UBS and Society. The UBS and Society program is cross-divisional and covers all of the UBS activities and capabilities in the areas of sustainable investing, philanthropy, environmental and human rights policies and community investment. Caroline has extensive experience in the areas of development, finance and communications.

In her recent role she served as counselor to the president of the Inter-American Development Bank. Before that, she worked at the World Bank for over 18 years in various roles, including as managing director with responsibility for operational policy and as a member of the World Bank Group senior management team. She also served as World Bank representative to the intergovernmental G20 and the G7. Prior to joining the World Bank, she was a Senior Producer and Editor at the BBC.

Caroline has a Ph.D. from the London School of Economics and Political Science and a postdoctoral research fellowship from Oxford University.

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