The Middle Eastern Sovereign Wealth Funds (SWFs), represent a whopping 86 per cent of the deal value in the overall GCC region. While 2023, marked a year of slowdown, the SWFs seemed to have a clear goal and purpose in mind – manufacturing and innovation, with a push towards green technologies.
The value of SWF deals in Asia rose to nearly 60% in the first three quarters of 2023, cites a Bain & Co report. The report added the biggest new moves of 2023 and beyond were the investments in Asian companies that bring innovation and manufacturing to the Middle East. There has been a visible strong work towards decarbonisation of existing portfolios while investing in green assets and technologies that support decarbonisation.
Focus on sectors of the future
The main categories of the strategic investments includes – acquisitions aimed at building local platforms in underdeveloped sectors, acquisitions to support the development of regional economies, and also solidify relationships, deals to invest in the sectors of the future like – EVs, technology-focussed bio manufacturing, and other areas, deals for visibility, and deals towards energy transitions.
Several Middle Eastern countries have announced their net-zero targets. Oman and UAE have pledged to reach net-zero emissions by 2050, Bahrain, Kuwait, and Saudi Arabia, aim to reach this by 2060. Currently, UAE and Saudi Arabia, are working to positioning themselves as leaders in the clean energy globally with both expertise in hydrocarbons and also an advantage in energy transitions and renewables, stated the Bain & Co report.
Decarbonisation and net-zero targets
This is clearly reflected in the M&A activity of the SWFs of the region. Both Mubadala and PIF have committed to net zero targets by 2050. Apart from decarbonising the existing portfolio, the funds are investing in technologies and green assets. The Bain & Co report stated that net-zero commitment will lead investment companies to consider emissions as part of the deal approval framework.
The report added it will require the active advocacy for emission reductions, and also evaluate investments in enabling decarbonisation technologies for portfolio companies.
The Asian push
This indirectly has also pushed the increased exposure of SWFs to Asia. Bain & Co highlighted that in the first three quarters of 2023, the funds invested a whopping $8.5 billion in the region across – India, China, Singapore, Japan, and South Korea.
Hyundai, the South Korean automaker and PIF entered a $500 million joint venture focussed on building a new Saudi Arabia based manufacturing plant. The localised Hyundai Vehicles are aimed at accelerating Saudi’s mobility and automotive landscape, and also attract investments into the wider economy.
There is a significant push towards strengthening ties with Asian countries to help build supply chain resilience in categories like semiconductors, green investments, automotive. There is a push to relocate the companies’ innovation, manufacturing and commercial operations to the Middle East.
