At the Future Investment Initiative (FII), the three-day conference in Riyadh that aimed at helping investors recalibrate, world leaders and corporate executives called for greater cooperation in tackling the global challenges of climate change, future pandemics, and the responsible adoption of artificial intelligence (AI).

Leaders warned that this is a time to be watchful and prudent, as an escalation between Hamas and Israel creates fresh fault lines in the investment world.

Still, being “cautious doesn’t mean you don’t do anything,” said Harvey Schwartz, CEO of private equity firm The Carlyle Group. “Cautious just means you’re quite thoughtful about how you are deploying that marginal bit of capital, but I think you’ll see really good opportunities.”

Here are the key highlights of the summit that concluded on Thursday. 

RISING DEBT CRISIS

With the global debt pile growing, the global economy faces a crisis of adaptation to rapid monetary policy tightening by central banks, an issue raised at the forum. And if this trend continues, it will have significant implications for international debt markets, particularly if interest rates remain higher for longer.

“As we all know, the global economy enjoyed the benefits of almost free money for almost 15 years, with historically low-interest rates,” Yasir Al-Rumayyan, the governor of Saudi Arabia’s sovereign wealth fund, Public Investment Fund, said in his opening remarks. 

But the tide has turned, with central banks tightening monetary policy globally, and now there are growing concerns about a debt crisis, high-interest rates, and the impact of war on the global oil market.

“As central banks tighten monetary policy, businesses and governments around the world must adjust to this new reality,” said Al-Rumayyan, who also chairs the FII Institute, the event’s organizer. “This has been the fastest rise in interest rates in 15 years”, which has unprecedented consequences for policymaking, he added.

RISING POWER OF BRICS

With the expansion of Brazil, Russia, India, China, and South Africa (BRICS) bloc of countries, business leaders suggested a new global economic playing field is set to be created, opening the door for Saudi Arabia, Egypt, and the UAE. The experts focused on BRICS’ ability to act as a counterweight to the West.

According to the IMF, the gross domestic product of the BRICs bloc in 2022 was worth $26 trillion. 

“What is needed is a multipolar and multi-economic world, said Lubna Olayan, chair of the executive committee of Olayan Financing Co., where the northern and southern economies work and survive together.  

“As businesspeople, we need to continuously try to navigate the business landscape and avoid politics, and that’s the reality if we want to operate in all parts of the world,” added Olayan.

AI WILL DISRUPT

Leading financiers are bracing for more short-term headwinds fueled by higher interest rates and geopolitical instability but agree there are still places to make money in the coming months.

“The year ahead will certainly present incredible opportunities,” Harvey Schwartz, chief executive officer of private equity firm The Carlyle Group, said at the conference.

Private fund stakes on the secondary market and mortgage pools sold by regional banks could be lucrative, said Jenny Johnson, president and chief executive at mutual fund giant Franklin Templeton.

In the longer term, experts agree that AI will present opportunities. “AI will disrupt. Like most technology improvements, it will benefit most people’s lives tremendously,” said Ken Moelis, founder and chief executive of investment bank Moelis & Co.

“We can see accelerated growth – around 70% of [all] companies will adopt at least one type of AI by 2030,” Al-Rumayyan said. “If harnessed for good, AI has the power to create a more inclusive society. To make this happen, global collaboration is needed along with internationally aligned regulations and governance.”

Discussing the rapid growth of AI, FII acknowledged the industry’s massive impact on the kingdom, projected to contribute nearly $160 billion to Saudi Arabia by 2030. 

However, as governments quickly adopt AI technologies within their infrastructure, the summit has called for creating an AI Coalition to bring together investors, corporations, government leaders, and academics from developed and emerging markets to discuss the governing of this new tech.

ENERGY TRANSITION

Speaking on alternative energy sources, Aramco President and CEO Amin Nasser stressed the need for a realistic timeline for an energy transition, citing high oil demand at the peak of coal consumption in the post-pandemic landscape. 

He said that investments in renewables need to happen in conjunction with a reliable and affordable oil supply.

“Demand for oil remains high at 103 million barrels a day, underscoring the need for a reliable, affordable supply even as we invest in renewables,” Nasser said. “Fossil fuels still dominate the energy mix, making up over 80%. Let’s be realistic about transition timelines.

According to Ember, a climate and energy think tank, alternative energy sources need to increase to 41 percent of the world’s electricity by 2030 to achieve net-zero emissions.

MANAGING GLOBAL CRISES

World Bank President Ajay Banga urged the private sector to get involved in tackling global crises, such as climate change and future pandemics. He said governments alone need more trillions of dollars to address these challenges.

Banga also noted the growing gap between the global north and the global south and expressed concern that people in the south feel left behind when it comes to economic growth. He said that $1 trillion is needed for renewable energy in emerging markets, and multiple trillions of dollars are needed to address global crises.

The World Bank and Jeddah, Saudi Arabia-based Islamic Development Bank signed an agreement to work together on the co-financing of multilateral development banks that are working on a range of projects covering food, water, climate, clean fuel, youth empowerment, and gender equity.

“The world’s issues are too big to be solved in silos, so [we] need to bring all shoulders to the wheel” and work together “so that two plus two becomes five,” Banga said.

DRIVING SAUDI GROWTH

Jerry Todd, Head of the National Development Division at the Saudi-backed Public Investment Fund (PIF), said that the sovereign fund is responsible for one-quarter of the total investment for the kingdom, which is targeted to be mobilized by 2030.

Todd said, “There’s a very important role for the private sector to enable investment across the entire Saudi ecosystem.”