Investcorp’s Head of ESG, Habib Abdur-Rahman: “Real Change Takes Time and a Sense of Shared Ownership and That Doesn’t Happen Overnight”

Q: Given the current economic climate and the debates that we see around us, have you seen more demand for more sustainable investment alternatives or a lean towards green investment options? Does Investcorp have plans to offer any special focus on green banking / green investments?  

A: There is no doubt that there has been more demand for sustainable investments and green alternatives globally, and the past few years in particular have seen a significant increase in investor appetite targeting sustainable funds and strategies. We’ve also seen demand pick up pace on the debt side in the form of green, social, and sustainability-linked loans, bonds, and sukuks, and we believe that this trend will continue in the context of the broader post-pandemic “green recovery” efforts we’re seeing globally.

I’m not sure there’s been a moment like this before where governments, businesses, and civil society across the world agree that significantly more must be done to address the sustainable development challenges we all face, not only because of their implications for our economies, but also in light of the pressing environmental and societal imperatives.

It’s also true, nonetheless, that definitions differ on what it means to invest in green products, and there’s been some tremendous work over the last year where we’ve seen greater levels of harmonisation with respect to sustainability standards and taxonomy. This has meant that asset managers have had to look carefully at how the funds and products they offer align with such emerging standards, while remaining cognisant that there are several shades of green.

Our primary objective at Investcorp is to create sustainable economic value for all our stakeholders, and at the heart of that must be people and planet. This is what our people and clients expect of us, and we believe that this objective is best served by firstly understanding in greater detail the financial and non-financial sustainability risks and opportunities that may exist within our current portfolio and using the same lens for the future investments too.

Q: Please tell us what you feel would be the one positive change that could be implemented at an industry level to raise the global standard on sustainability and carbon neutrality, taking the industry to the next level?

A: The challenge with sustainability, broadly speaking, is that several interconnected topics need to come together to truly drive the change we need to see on a global scale. There, unfortunately, isn’t a panacea to such a multifaceted issue as the problem cuts across policy and regulation, technology and innovation, and capital deployment at scale – all three, along with education and training, need greater alignment to take the asset management industry to the next level.

Consider policy and regulation, for example, where I believe there is a strong need for frameworks that provide sufficient clarity and certainty for investors, particularly at the sector or industry level, whilst also incentivising behaviour that allow the world to transition to “net-zero”. Government incentives in certain countries regarding electric vehicles, for example, have contributed to a rapid increase in the share of electric transportation in recent years, while increased innovation has, in turn, brought costs down over time, and has made electric vehicles an increasingly competitive alternative to internal combustion engine vehicles.

There is also the widely recognised problem of a lack of clear and consistent global climate standards, which are needed to facilitate more meaningful and actionable reporting and disclosures that can be used by a variety of market participants. We’ve seen some consequential developments to address this problem in recent years particularly with the Task Force on Climate-related Financial Disclosures (TCFD) and more recently with the formation of the International Sustainability Standards Board (ISSB). These efforts are helping to establish a common understanding of the baseline that we’re working from, which is a critical first step to help direct capital and expertise in a manner that creates sustainable economic value over the long term. 

Finally, we must not forget the importance of supporting global grassroots movements, catalysing and advancing debate on issues of regional importance, and directly supporting local ventures and talent through both technical and financial support. 

Q: What does it mean to you, to see both yourself and Investcorp on the regional/ GCC stage in the context of being committed to sustainability?  

A: It’s hugely important to me that commitments to sustainability are followed by positive real-world outcomes. If we’re not careful, sustainability can quickly become overshadowed by disclosures and reporting, and we’ll be at risk of losing sight of the bigger picture.

I think it’s very important to highlight that real change takes time and a sense of shared ownership amongst stakeholders, which itself doesn’t happen overnight. One thing that I’m particularly proud of is the way we have taken the time at Investcorp to engage with all our stakeholders to ensure that a broad representation of people, backgrounds, and views are listened to, considered, and reflected in our sustainability thinking.

It's a privilege to be recognised for the work we have done so far, but the focus must remain on laying the foundations for our business for the next 40 years that follow our first 4 decades, which, at the core of our business, is responsible for our investment and sustainable business practices. There is a significant amount of work left to do, particularly at the intersection of global climate imperatives and an increasing appetite among our clients to participate in the investment opportunities arising from the climate transition.

Q: How do you see Investcorp being a part of the GCC's Energy Strategy 2050, which aims to increase the contribution of clean energy in the total energy mix and reduce the carbon footprint of power generation significantly?   

A: Investcorp is fully committed to the regional decarbonisation agenda and as the largest asset manager in the region, we see ourselves as a partner in the region’s energy transition strategy. 

I believe that part of Investcorp’s role is to help develop the regional ecosystem, one that facilitates research and innovation, enabling small and medium-sized businesses, in particular, to explore sustainability ventures and build the technologies of tomorrow. We have a huge opportunity to nurture talent and technology, and in my view, it would be irresponsible not to do so.

There’s no doubt that the Middle East’s net-zero ambition has ushered in an era of renewed urgency in terms of transitioning to a world with a lower carbon footprint, which brings with it opportunities to build and invest in sustainable, inclusive, and long-term growth.

There has been considerable momentum in recent years across the GCC particularly with regard to clean energy, but I think it’s important to acknowledge that GCC economies recognised the need for diversification away from fossil fuels many years ago, and as a result have developed considerable expertise in and capacity for renewable power generation. 

As the region continues to articulate what the alternatives to traditional energy sources might look like, we are committed to putting our capital to work and leveraging our expertise to source compelling investment opportunities that incorporate our perspectives on the global secular trends we see today.

Q: Which ESG issue matters most to Investcorp? How is the Middle East’s Net Zero ambition shifting the future of investing in the region?

A: ESG is both a very complex issue as well as a controversial one. The reach of topics typically considered under its banner ranges far and wide, and the same topic can mean different things and have differing implications depending on the country, industry, or company under consideration. Furthermore, our clients may take different or even opposing views on what they consider to be the most pressing issues, and it is our responsibility to appropriately consider the views of all our stakeholders when determining where Investcorp’s scale and reach can be most effective.

At Investcorp, we’re focused on building sustainable economic value for our stakeholders through responsible business and investing practices. At a macro level, this means supporting responsible employment practices, being a responsible citizen with regard to sustainable resource consumption, and ensuring the highest levels of governance and transparency across our investment and corporate business activities. These considerations apply as much to Investcorp as they do to our portfolio companies.

Our efforts are also focused on addressing the biggest issues relevant to us and our portfolio companies in the markets in which we operate, which will differ by region or country. For example, I sense that matters of diversity and inclusion resonate most strongly with stakeholders in North America, whilst the climate transition is a relatively more mature focus in Europe. In Asia, however, corporate governance practices followed closely by diversity and inclusion are areas we feel require greater attention and where we believe we can make a good contribution.

The understanding of ESG has rapidly evolved over the past few years and will no doubt continue to evolve as we learn more, and that’s why we will remain agile in our approach when allocating resources and expertise to what we view as the initiatives with the potential to have the most impact. 

Q: Please tell us more about your background and family and journey with Investcorp as well as how sustainability became a passion for you

A: I was born and raised in London and was educated at Imperial College and the University of Oxford. It was during these years as a student that I developed a strong interest in sustainable economic development, particularly in emerging and frontier markets. 

I started my career as a management consultant focused predominantly on corporate strategy, before pivoting to venture capital funding which was focused on early-stage investments in technology companies.

Prior to joining Investcorp, I took a break to explore the challenges faced by low-income countries in terms of translating policy into real change on the ground, particularly with regard to education, energy, healthcare, and social services. It became quickly evident to me that this process of translation would take several years, if not decades, particularly when leaders are simultaneously tackling other pressing issues – such as corruption in post-conflict countries – whilst also trying to live up to the demands of the international community. 

I draw a parallel between this and the challenges associated with global sustainability initiatives. Whilst encouraging high-level commitments have been made and the development of policy frameworks to support such commitments are well underway, translating such policy work will also take several years, if not decades, before we see real sustainable change on the ground. 

This is all the more relevant when considering the vast disparities between countries, particularly in terms of their relative economic abilities to transition away from fossil fuels, and where millions of livelihoods are tied to fossil fuels. Are we doing enough to retrain and provide quality job opportunities for our green future? Are we doing enough for the communities around the world who are disproportionately impacted by climate-related inequities, but are also least responsible for causing the crisis? Are we at risk of “doing sustainability” for some at the expense of others?

It is in this context that I believe the financial services industry must play a central role in this policy “translation” effort, not solely in terms of funding innovative ideas and technologies but also in pioneering innovative approaches to transition financing.

It was in recognition of the role that I believe Investcorp can play – given our reach, scale, and history – that I transitioned into my current role as Head of ESG with overall responsibility to drive the firm’s sustainable investing agenda. I consider myself fortunate to be working at the cutting edge of the industry, rethinking, reshaping, and re-evaluating current business practices at such a critical time in our collective history and also by being at a firm that I believe is committed to making a difference.