The adoption of Environmental, Social, and Governance (ESG) principles has become a global phenomenon, driven by increasing awareness of sustainability and ethical business practices. Consumers worldwide are more inclined to support brands that demonstrate a commitment to ESG, while investors are channeling funds into companies that prioritize these principles.

• Consumer Behavior: A growing number of consumers are willing to pay a premium for products and services that adhere to ESG standards. Globally, over 70% of consumers prefer to buy from brands that reflect their values, particularly around sustainability and ethical practices.
• Investment Preferences: The investment landscape is also changing, with ESG funds outperforming traditional funds in many cases. In 2023, ESG-focused investments accounted for more than one-third of total assets under management globally.
• Corporate Commitment: Businesses are increasingly integrating ESG into their core strategies. Companies that lead in ESG practices are not only enhancing their reputations but also experiencing better financial performance and employee satisfaction.

New Metrics set to assess the current state of ESG in the Middle East, especially in UAE and KSA, by examining the local attitudes and behaviors of consumers, investors, and employees. 

Key Takeaways

• KSA: Higher willingness to pay more for ESG, strong preference for ESG investments, and significant employee emphasis on ESG commitments.
• UAE: Growing willingness to pay more for ESG, robust market for ESG investments, and substantial employee emphasis on ESG commitments.
• Business Implications: Companies should enhance their ESG initiatives, transparently communicate these efforts, and integrate ESG into their corporate culture to attract consumers, investors, and employees.

Willingness to Pay More for ESG

Consumer willingness to pay a premium for ESG-compliant products and services is a strong indicator of market readiness for sustainable practices. Our survey data reveals a significant inclination among KSA consumers to pay more for ESG, with 43% of respondents highly likely and 36% slightly likely to pay extra. In the UAE, consumers exhibit similar but slightly varied preferences: 34% are highly likely and 46% slightly likely to pay more for ESG.

The higher percentage of KSA respondents highly likely to pay more for ESG suggests a robust market for sustainable products and services. Businesses in KSA can capitalize on this willingness by prominently featuring their ESG initiatives in marketing and product offerings. In the UAE, the broader base of consumers slightly likely to pay more indicates a growing readiness for ESG but highlights the need for continued education and engagement to deepen consumer commitment.

Investors vs. Non-Investors

Investment behaviors also reflect attitudes towards ESG. In KSA, out of 581 respondents, 229 have invested in stocks, bonds, or other forms of investment, compared to 353 non-investors. In the UAE, the numbers are more balanced, with 303 investors and 272 non-investors.

The relatively balanced proportion of investors in both markets underscores the growing importance of ESG in investment decisions. In both KSA and UAE, companies committed to ESG principles are likely to attract more investors, especially as awareness and appreciation for sustainable and ethical investment options increase. Businesses should therefore ensure that their ESG commitments are transparent and well-communicated to appeal to this investor base.

Investment Preferences for ESG-Committed Companies

When considering investments in companies committed to ESG, KSA respondents show a strong preference: 53.07% strongly agree and 36.84% agree that they would invest in such companies. In the UAE, while still significant, the numbers show 42.05% strongly agree and 45.7% agree.

The strong preference for ESG-aligned investments in both markets highlights the increasing importance of ESG commitments in attracting investment. The higher intensity of preference in KSA suggests that companies in this region might benefit more from emphasizing their ESG credentials. For UAE, the substantial agreement still indicates a robust market for ESG investments, albeit with slightly more room for growth in investor conviction.

Importance of Employer’s Commitment to ESG

Employee perspectives on ESG are crucial for talent attraction and retention. In KSA, 50.71% of respondents strongly agree and 40.2% agree that it is important for their employer to be committed to ESG. In the UAE, these figures are 39.69% and 45.28%, respectively.

The data indicates that employees in both KSA and UAE place significant importance on their employer’s ESG commitment, with a slightly higher emphasis in KSA. Companies should prioritize ESG initiatives not only to attract investors but also to recruit and retain talent. Emphasizing ESG in corporate culture and employee engagement can enhance employer branding and workforce satisfaction.

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Our data reveals distinct but significant trends in ESG attitudes and behaviors in KSA and UAE. Consumers and investors in KSA show a slightly higher willingness to support ESG initiatives financially and through their investment choices, while employees in both markets value their employer’s commitment to ESG. Businesses in KSA and UAE should leverage these insights to align their strategies with the growing demand for sustainability and ethical practices, ensuring they remain competitive and appealing in these evolving markets.

By understanding and responding to these attitudes, businesses can better position themselves to meet the demands of a more sustainability-conscious market in KSA and UAE.