Impact investing and ESG is of increasing interest to private clients in the Middle East and experiencing significant growth according to Ocorian, the fiduciary led specialist global provider of services to financial institutions, asset managers, corporates and high net worth individuals – as the region undergoes a generational shift.
However, this is causing a ‘generation gap’ between family members, with next-generation private clients leading this growth in ESG investments and taking a very different approach to that of their parents or grandparents. Next-gen family members are not only looking at very different types of investments, from ESG investments to cryto, but are increasingly wanting to transform their own family businesses to become true advocates of ESG and sustainability.
Traditionally, families and ultra-high net worth individuals that hold assets outside of the Middle East tend not to structure them domestically, but, for the first time, there is a significant rise in the use of foundations for domestic structuring.
As part of this, the DIFC, ADGM and RAK ICC foundations regime has increased dramatically, with 550 foundations registered with Ocorian as of September 2022.
The UAE foundations are also the only private wealth vehicles which can hold UAE real estate. These are also the only orphan structures without shareholders in the Middle East, allowing for the transfer of the ownership of assets from own name, which is a key tenet of asset protection, which facilitates the flow of wealth across generations and the continuity of business.
This is another generational shift, with next-gen family members becoming much more aware of the need for asset protection and financial security. There is an increase in the awareness of the need for structuring alongside a deepening sophistication of family governance.
Next-gen family members also have an increasing desire to professionalise the family office. Alongside investments, family offices are now being used for protection of wealth, succession and intergenerational planning and governance.
Lynda O’Mahoney, Global Head of Business Development – Private Client said: “As we strengthen our commitment to the Middle East, we’re seeing a generational shift which is resulting in far-reaching changes in how private clients operate – everything from their investment outlook and a rising trend in impact investing and ESG through to how they are structured and a professionalisation of the family office. These new trends are very exciting but can also bring new challenges, such as making sure that investments are both achieving target returns as well as the desired ESG credentials. We are helping private clients across the region to navigate these new issues, from foundation and trust services to succession planning for family assets and businesses, so that they can take full advantage of the opportunities in the Middle East and beyond.”
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