Responsible investing has always been a part of Mubadala’s DNA and as we have evolved into a globally recognized investor, our investing journey has progressed too.
Throughout our evolution we have remained firm on our mandate to invest for financial returns, but just as importantly to have a positive impact on our communities and future generations. Science tells us that the risks associated with climate change are real - at the current rate of emissions we have less than nine years left to limit global warming to 1.5 degrees.
With climate risks only set to grow over time, urgent action is needed to decarbonize and create a sustainable future. We continue to take steps now to deliver on our mandate. Our priorities remain to continue embedding ESG principles across our entire investment lifecycle and evolving the institutionalization of responsible investing across our business. This makes sound business sense, helping to drive stronger financial returns, but also produces positive outcomes for society. Our approach is highly considered, pragmatic and practical.
In this Year of Sustainability and as the UAE gets ready to host COP 28, we are firmly committed to playing our role in making the conference a success, but more importantly contributing to the global effort. We are supporting the UAE to deliver a COP of action, and as a global leader, to working with the world’s most influential partners to help find solutions to one of the world’s biggest challenges.
Mubadala believes that Environmental, Social and Governance (ESG) factors are fundamentally linked to our ability to protect and create long-term value at both the asset and portfolio levels. As a result, Responsible Investing (RI) is important to achieving our mandate of generating strong risk-adjusted returns over the long term, while building a sustainable future.
Our approach to integrating ESG principles and considerations into our investment management process and ownership practices is governed by our RI Policy, which was published in June 2021. This Policy is the foundation of our RI Framework, which sets out our structured approach to Group-wide ESG performance measurement, monitoring and management activities, ESG training and development for our employees, stakeholder management and ESG-related communications efforts.
In 2022 we achieved significant progress in the implementation of our Responsible Investing Policy and Framework. Some examples illustrating this progress include:
Strengthening the RI Unit
Developing the RI Framework
Engaging Portfolio Companies on Climate Change
Progressing our Carbon Management
Building Fluency
Promoted Stewardship
We continue strengthening the integration of ESG principles and considerations into our investment management process, and leveraging our scale, global presence and partnership-oriented approach to promote Mubadala as a steward and advocate of ESG and Responsible Investing across the markets.
Marshaling Capital Towards Solutions to Global Problems
Five years ago, President Emmanuel Macron of France brought together a group of sovereign wealth funds to help act on the framework of the Paris Climate Accords. Since then, the One Planet Sovereign Wealth Funds (OPSWF) Network has grown to more than forty-five of the world’s largest institutional investors - sovereign wealth funds, asset managers and private equity houses - that together manage or own more than USD 37 trillion worth of assets.
In October 2022, the 5th Annual One Planet of Sovereign Wealth Funds CEO Summit took place in Abu Dhabi. It was the first time the OPSWF gathered outside of the Elysée Palace in Paris, France, making it a significant occasion for the emirate as the UAE gears up for COP 28. OPSWF Network members account for a substantial portion of the global economy, enabling it to play a key role in the transition to a low-carbon future.
Mubadala and ADIA co-hosted the event to drive greater engagement in mitigating climate change by advocating dialogue and collaboration across the OPSWF Network as it works to provide stewardship and guidance to the global investment community.
The world needs to innovate and develop alternative sources of energy, materials, and consumables for a sustainable future. The energy transition and accelerating the development of renewables and clean hydrogen are vital challenges. It is a journey that requires systematic and responsible action and, for this to occur, collective endeavour is key.
Sovereign wealth funds are well suited to be change makers. Our multi-generational investment horizon matches the very long term, sustained effort required to tackle big challenges such as climate change.
OPSWF Network Members Focused on Three Broad Areas
In the private equity space, where sovereign wealth funds own roughly sixteen percent of global private equity assets under management, there is a significant opportunity to advance the quality and quantity of climate-related data. OPSWF Network members recognize that better data is critical to making well-informed investment decisions that include considering the risks and opportunities associated with climate change.
Clean hydrogen is another important focus of the OPSWF Network and a priority for the Government of the UAE. Hydrogen is widely recognized as a key component of the energy transition. It can be used as a zero-emission fuel, a versatile energy carrier, or a flexible storage solution with multiple applications across the entire economy, complementing and amplifying electrification efforts in sectors like transportation and other net-zero emission technologies. Mubadala has partnered with ADNOC and ADQ to establish the Abu Dhabi Hydrogen Alliance, which aims to establish the UAE as a leader in hydrogen and build a substantial green hydrogen economy.
The third focus of the summit was on renewables investment in emerging and developing markets, where considerable opportunities exist to mitigate climate change while also growing economies. Members of significant scale across the OPSWF Network collectively have the ambition to increase their investments in renewables in those markets if the right policies and incentives are in place. Successfully addressing the priority enablers will increase flows of other private sector financing.
Mubadala is proud to be joining the international financial community to find common ground to build a sustainable future.
At COP 27, Mubadala sponsored the Bloomberg Green Summit, which convened leaders in business, finance, policy, academia and NGOs for conversations focused on delving into pragmatic strategies for cross-sector climate action. This high profile event was a hub for action-oriented business conversations at COP 27 and Ahmed Al Calily, Mubadala’s Chief Strategy & Risk Officer, had the opportunity to discuss Mubadala’s approach to Responsible Investing (RI).
He highlighted that RI and providing returns for future generations is part of the company’s DNA. He also referenced the Bloomberg Media Sustainable Futures study, commissioned by Mubadala, which revealed that 85 percent of business decision makers surveyed believe that investing with ESG considerations will improve overall returns, and 79 percent said sustainable investing is a significant consideration in their investment process.
Derek Rozycki, Head of Responsible Investing, also spoke about Mubadala’s efforts to institutionalize RI and develop tools to integrate it into the investment lifecycle. He touched upon how Mubadala has helped mobilize capital for clean energy in emerging markets and referenced Masdar’s approach to working with governments to set up contractual structures and do first time deals that establish the template for new renewables deployment within that market.
A further significant pillar of Mubadala’s approach to RI is its work with the One Planet Sovereign Wealth Fund (OPSWF) initiative. Substantial progress was made by coming together to focus on the 75 percent of the market that is held privately and provides no information on its climate footprint.
Together, Mubadala and OPSWF took the step of strongly encouraging their GPs to provide them with information about their respective portfolio companies’ carbon footprint for 2023.
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