Making an Impact on the GCC - In discussion with Mohab Al Hinai and Badar Al Shanfari
Sustainable Investments Oman is an ESG investment company founded with a vision to facilitate and introduce cutting-edge technological innovations in the MENA region. With a focus on food security, energy and health. The Sustainable Investments philosophy is to invest in people and technologies that can help achieve harmony between the economy, the society and the environment. We met co-founders Mohab Al Hinai and Badar Al Shanfari to learn about how they began this journey and what has inspired them to be the gateway to a sustainable Oman.
Image credit Silas Baisch
Mohab: Initially this started with myself, Badar and our third co-founder Faris al Battashi, we have known each other since 8th grade and we came together a few years ago when the field of sustainable investing and impact investing was growing, and discussed it, coming to the conclusion we should try to make some noise in this space by tapping into our network in the US and Europe and Asia.
We started gaining a momentum and
now have welcomed a 4th partner Rehab who was a colleague of Badar’s in his previous job with the Sovereign Wealth Fund here in Oman.
The four of us are the core team and we are really addressing what we do not consider a matter of sustainability but a matter of survival. The Earth is the only home that humans know, (I know that some nations would like to go to Mars but the rest of us are staying behind on earth) and with limited resources and limited space the ten billion people expected by 2050 will need water, energy, healthcare, food and waste disposal. So that is why our philosophy is to invest in people and companies which help to produce harmony between the environment and the economy.
Badar: To add to that, we are each coming from different backgrounds - Mohab is from a biotech background and Faris is from a mechanical engineering and I am from an investment background as is Rehab who joined us recently. We feel that technology can play a huge role in bridging the gap between the developed world and the developing world and help towards a sustainable future. Aligning our choices with financial sense is really where our philosophy sits. We want our investments to make an impact. In addition our approach is to know the founder and the company and to not only invest but add value and bring technologies back to our region. Our first investment SuperBrewed Food based out the US for example. They're looking at improving the yields in food production which is a key issue around the globe, particularly in parts of the world like the middle east where there is a scarcity of water. We feel our companies complement each other and the goal at the end is that when people think of Sustainability in Oman they think of Sustainable Investments and get in touch with us. After all our main objective is to drive sustainability around the world as we are all in it together.
Can we look more at your portfolio of investments to date.
Mohab: Sure, Let's start with SuperBrewed Food which was the original investment that we made. I have a personal, 20 - year connection with the founder who I did my grad studies with in the US, and I saw him start his company - literally in an unused lab which he cleaned up. In other words he started his company from scratch and since it has been acquired twice. They produce alternative proteins from microorganisms. This is a very important topic because livestock is one of the biggest producer of methane and as well as being an important source of protein. Their technology which uses microorganisms to produce high quality proteins, not only for human nutrition but also for aquaculture and animal feed, can help solve a lot of problems, and as Badar said it is really about investing in people and not just the technology, so that is why in almost all of our investments we know 1 or more of the founders personally, and know they share the same passion for sustainability and are driven to succeed.
Badar: In that case we worked with the founder of the company even when it was at the pre-commercialisation stage and brought him to Oman and introduced him to potential partners and the main stakeholders in the food and agribusiness sphere, to inform them that there are alternatives and technologies which can help their business to become more sustainable. We were very impressed with the feedback we got and there are at least two potential large clients looking to use the products once they are commercialised. So this is really an ideal investment for us, where we invested early, are working with the founder to really find customers in the region which can help the objectives of our firm. This one story was really the start of our company. Moving to other investments the next one was Agfunder which is a VC fund that invests in early stage foodtech or agritech. We looked at their portfolio and we really liked it in the sense that it ticks a lot of boxes of our investment philosophy and we were the first investor from the Middle East to invest in their fund so they can reach out to us and we can support them in any way. The relationship has led to two co-investments with them, the first is in vertical farming out of Scotland. For us the financial return is important but we are happy to see that any leading technology is being employed in Oman and the MENA region, so we were impressed to know the company had already a presence in this market. Our next investment was in RetailO which is essentially making individual store/shop holders more efficient by looking at their resource usage and wastage. They are currently in Saudi and Pakistan and once they start looking at Oman we are there to help them. On the face of it - it may not look like it has direct impact but I believe it has because you need to look at the way they are helping achieve sustainable growth for small businesses. Our final two investments were in Korea - with TMap Mobililty a company belonging to SK group one of the largest privately owned groups in South Korea - again they are focussing on efficiency, and we made the deal through private connections. And the last was SpineBiopharma.
Mohab: Just quickly going back to our philosophy - food, energy and health. If you look at any of our investments we look at ticking all the boxes in the ESG framework. Whether they have an environmental impact or social impact like providing better employment opportunities, or better returns for micro business owners and obviously the governance is important in terms of transparency and with diversity in the business. We look at this and therefore we can be considered an ESG investing firm. Also one of our verticals is raising awareness about sustainable investing through awareness sessions with big private equity firms here in Oman. Now If I go back also to SpineBiopharma, they produce a seven amino acid peptide which is injected into the spine to reduce inflammation. There are millions of people in the US alone suffering from degenerative spine disease and so this has a real social element to it where this drug can help millions around the world live a more comfortable life. And just following on from what Badar said - typically the differentiating factor in how we invest is our personal connection with the people we invest in - Network is power. Knowing people you get that comfort level to ask the tough questions and get honest feedback which we feel is very important in our line of work.
Badar: Yeah especially as a lot of our investments are early stage and there you really have to add the element of trust to the due diligence process you do. Whilst we would love to invest longer term in companies from the region, the eco-system is not really there at the moment for this type of science and technology. We want to make it easier for these companies to come to the GCC and Oman in particular. Some of the companies we have invested in would have never thought of coming to Oman as the market size is not there. They would naturally look at the US market or the Chinese market but we feel there are missed opportunities and we can (through knowing these individuals on a personal basis) bring them to the GCC.
So what do you think it is that makes companies want to work with you?
Badar: while would like to say we have deep pockets, there are much deeper pockets in the region than us, so it really is the value add. Good start ups know they can get funding, but they want to see what you can bring to the table other than capital. Due to our network we feel we can open doors in the region which might have been more difficult for VCs that are still in an early stage of their lives.
Do you have plans to eventually launch funds for other investors to participate in?
Badar: Naturally we have been on the other side - and we know that people are looking for track record so we have taken things steadily. We are targeting by 2025 to launch officially our first fund, where we will have anchor investors from our group but also be open to other investors globally. It will be the same theme of ESG. There is a lot of overlap between shariah compliance and ESG and that is something we have been contemplating. When the fund comes, it may be both shariah compliant and ESG, and I do not see that reducing the investor pool - we are certain it will increase it.
Do you think there are facilities in Oman which make working in the SDG space more straight forward?
Mohab: I am sure you are familiar with Oman Vision 2040. A lot of the targets are set in line with the SDG principles. They have environmental sustainability, equal education and employment opportunities, and a competitive economy; but also they are trying to address a circular economy. You have to remember - this region has been fuelled by the Oil and Gas sector and so you can look at it like an ocean liner - it takes a lot of time for them to turn, but we do see them starting to pivot away from a polluting, fossil fuel-based economy. In Oman the Ministry of Economy has set circular economy and sustainability as the supporting pillar for the current 5 year economic plan. Also, Oman is trying to become a global heavyweight in green hydrogen and definitely the government support is there and looking at a greener future.
Badar: The SDG angle in Oman is hot. Oman wants to introduce more SDG policies like the one recently by the Capital Markets Authority. One of our objectives from an ESG perspective is the education part. Because here you can ask someone ‘have you done some ESG investing?’ and they will say - ‘oh yeah of course, we have donated to a charity’ for example - so they are mixing up ESG with CSR, so I think maybe there is a big segment of society which does not have a clear understanding of ESG. Policy makers and corporate decision makers need to understand what their targets are and how they need to be achieved. This will be done by incentives and a requirement for reporting which is going to be a thing as we saw from COP26.
Is there a natural affinity between Muslim corporations and ESG that perhaps many do not realise?
Badar: In my point of view Shariah and ESG are almost the same so it is a matter of bringing clarity for those who do not have a clear grasp on either one so they can take a clear advantage of their position and recognise the cross over. It will be education that will be the game changer. It is much easier for a shariah compliant business to transition to ESG. For small and medium sized businesses they need the grasp of what ESG is.
Mohab: Shariah compliant businesses will always tick almost all the ESG boxes.
Many of your investments are fundamentally technology based. How do you feel that technology is a game changer in the sustainability agenda?
Mohab: Technologies for the most part are enablers of society or community. In the region you can see an uber clone come up and become very successful, becoming a unicorn, because all you need is a laptop and a clear mind and great idea - the market is there. But what are the chances of a Pfizer or a Moderna coming up from scratch in the region – very, very slim because the ecosystem today is not there. Many people consider technology to be ICT based but that is not true, technology is any piece of equipment or idea which makes life easier for the human race.
Badar: Technology is the biggest tool in bridging the gap and allowing the developing world to come up. In the GCC we have been fortunate enough to have wealth and a good education system but in neighbouring areas like Yemen - technology can bring access to education and tools through the internet. Indonesia is becoming a hub for fintech driven by a young population who have access to the skills required to build new technologies. Once the knowledge gap is reduced, you will see better-qualified young talent emerging and building the ecosystem for all forms of technology and innovation.