Our strategy is derived from the mandate given to ICD in its governing law:
- Consolidate and manage the existing portfolio of companies and investments of the Government of Dubai;
- Provide financial and strategic oversight of the portfolio in order to preserve wealth and grow value sustainably; and
- Efficiently deploy and recycle capital by making new investments, either locally, if commercially sound and strategically aligned with ICD’s mandate, or internationally, to enhance returns and diversification.
Significant progress was made with regards to the first part of this mandate in the early years of ICD’s life. The composition of the core portfolio has remained relatively stable, whilst achieving growth and performing well over cycles.
For some time now, our focus has been directed towards portfolio management and capital deployment, both critical to the successful implementation of the second limb of the mandate.
In recent years, as a natural evolution of the strategy, we have increasingly emphasised capital deployment in international markets and in diversifying asset classes to enhance the long-term risk-adjusted return potential of ICD’s investment portfolio.
As an institution with a mission to create wealth and long-term value, with a focus on sustainability, we have adopted several guiding principles designed to inform our investment process:
- Emphasis should be placed on capital preservation and prudent appreciation, adjusted for inflation;
- Capital allocation decisions should be the result of disciplined and thorough evaluation;
- Decisions to invest, manage and exit investments should be made on commercial principles;
- Investments should demonstrably provide either strategic or diversification benefits, and contribute to risk-adjusted returns and overall portfolio construction objectives; and
- Performance should be monitored and assessed regularly, through ongoing oversight and appropriate levels of engagement.
As reflected in our core values, we are committed to following ethical practices in everything we do and we aspire to be a trusted partner to our portfolio companies, external managers, and other stakeholders.
While ESG was always an important factor in our investment decisions, in 2021, we formally introduced ESG as part of our investment framework.
ICD’s approach to ESG as it relates to our investments is based on the following key beliefs and principles:
– By incorporating ESG into our processes, we can make better investment decisions, associate ourselves with like-minded partners, and enhance the quality and sustainability of our portfolio;
– ESG factors can have a material impact on the intrinsic value of investments. Companies with strong ESG culture and practices offer prospects for better risk-adjusted returns over the long-term. They tend to be more resilient and take to heart their role in the communities they serve; and
– We subscribe to the view that it is important to adopt a fundamental, pragmatic, bottom-up perspective, rather than a top-down, rigid, rules-based approach to ESG. We believe in engaging constructively with fund managers and management teams to promote positive change and in supporting companies in their transition towards long-term sustainability.
Our approach to asset allocation and investment selection is underpinned by the following features:
- Maintaining a high level of visibility on ICD’s short and long-term cash flows and funding requirements to support robust capital budgeting, giving consideration to existing commitments, the effective build-out of long-term investment themes, and well-timed capital recycling;
- Clear framework for capital allocation across asset classes and sectors internationally;
- Willingness to partner with external managers to secure the best access to high-quality investments globally;
- Continuous review and calibration of market dynamics and industry trends to form develop views on asset classes and sector attractiveness, encourage the development of new investable hypotheses and shape our approach on possible allocation; and
- Professional and efficient transaction execution balancing thoughtful and quality execution, with nimbleness and an ability to respond to opportunities with appropriate speed.
Taking these features into consideration, asset allocation is determined by balancing commitments to strategic initiatives, support of portfolio companies, capital recycling events and new investments in target verticals.
Whilst investments in Dubai have historically favoured a significant degree of influence and active engagement, our approach to international investments leverages the expertise of highly credentialed external managers offering access to our target asset classes, sectors, and geographic markets.
We aim to strike a balance between strong conviction in our investment decisions based on sector knowledge and deep due diligence, and diversification of our exposure and reliance on external managers.
When evaluating new investments or commitments, we place significant emphasis on corporate values and governance, and we look for companies and asset managers with best-in-class structures and processes. Where we have significant influence, we encourage sound governance, effective decision making and strong execution. When we are a minority investor, we remain actively engaged with our partners and aim to be a reliable, responsive, and trusted investment partner.
At a minimum, we aim to achieve a positive engagement on ESG with our investment partners during the investment process and contribute to improving ESG performance throughout the lifespan of the investment.
Specifically, as it relates to ESG, our approach is designed to recognise, in particular:
- The diversity of the companies within our portfolio;
- The transitioning periods necessary for companies to realise their long-term sustainability goals; and
- The degree of ICD’s influence that can be exerted on a transaction-by-transaction basis.
Our ESG investment principles are put into operation through the adoption of the following guidelines:
- We will incorporate ESG principles in our investment process, including in our initial deal screening, due diligence reviews, and in our assessment of potential ESG-related risks and opportunities throughout the duration of our investments;
- We will seek out and work with investment partners and fund managers that share our ESG values;
- We will encourage portfolio companies and fund managers to embrace sustainability and ESG principles and best practices, and transparently report on actions taken and results achieved; and
- We will not invest in companies or commit to funds that disregard ESG principles.