Our strategy is derived from the mandate given to ICD in its governing law and translates into the following guidelines:
- 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;
- Realise value from non core assets when appropriate; and
- Allocate 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 journey. 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 ICD’s Mandate.
In recent years, as a natural evolution of the strategy, we have emphasised a gradual repositioning of the portfolio to achieve a greater level of diversification and to enhance its long-term risk-adjusted return potential.
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 through ongoing oversight and appropriate levels of engagement, and assessed regularly.
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.
Our approach to asset allocation and investment selection is underpinned by the following features:
- Robust capital budgeting process, 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, sectors and geographies;
- Partnership with external managers to secure the best access to high-quality investments globally;
- Continuous evaluation 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;
- Efficient implementation balancing quality execution and an ability to respond to opportunities with appropriate speed; and
- Regular evaluation of key performance metrics to assess the health of the portfolio and the success of the investment strategy.
Taking these guidelines 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.
In Dubai, we have historically favoured having a significant degree of influence and active engagement. Internationally, we leverage the expertise of highly credentialed external fund managers offering access to our target asset classes, sectors, and geographic markets.
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. In all cases, we incorporate ESG considerations in our investment decisions.
ICD’s approach to ESG as it relates to our investments is based on the following 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 preferable 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.
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, 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:
- ESG considerations are an integral part of 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 seek out and work with investment partners and fund managers that share our ESG values;
- We 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.