Opportunities on the Horizon: Investing Through a Slowing Economy

Thematic updates | WEALTH OUTLOOK 2023 | MID-YEAR EDITION | 54 FIGURE 7 : Saudi Market vs Crude Oil 30 40 50 60 70 80 90 100 110 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 2017 2018 2019 2020 2021 2022 2023 $/Barrel Index Level Saudi Tadawul All Share Index LHS Brent $/barrel (RHS) Source: Bloomberg as of May 31, 2023 . The indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. Past performance is no guarantee of future results. FIGURE 8 : Investment in Renewable Energy vs Fossil Fuels 0 200 400 600 800 1000 1200 2018 2019 2020 2021 2022 Billions of USD Renewable energy Electrified transport Other Renewals Fossil Fuels Source: Bloomberg New Energy Finance as of May 2023. Chart shows how investment in renewables compares to investment in fossil fuels and electrified transport. The Middle East is leaning green, too Meanwhile, growing geopolitical tensions and changing market dynamics have prompted some Middle Eastern countries, particularly Saudi Arabia and the United Arab Emirates (UAE), to invest heavily in renewable energy sources to prepare for an eventual shift in the global energy landscape (See Middle East Strategy ) . These investments have taken various forms, including the development of large-scale solar and green hydrogen projects and the construction of refineries focused on producing petrochemicals instead of traditional transportation fuels. The shift by Middle Eastern countries toward renewable energy sources has been driven by concerns over stranded assets and the growing global focus on energy transition, as well as the favorable economics of solar power in the sun-drenched region. At the same time, Saudi Arabia and the UAE continue to expand their oil production capacity, reflecting their belief that oil demand will not decline as quickly as some expect. This has led to a delicate balancing act, as these countries seek to capitalize on their vast, low-cost oil reserves while also preparing for a future in which fossil fuels play a diminishing role in the global energy mix.