Reuters survey suggests there is some way to go before the investment giants completely pivot
With the issue of climate change becoming ever more urgent, what are the world’s sovereign wealth funds (SWFs) doing to make their investments sustainable?
That’s the purpose of a new survey from Reuters which aimed to discover the extent to which SWFs have pivoted to sustainable investing and adopted ESG principles.
The conclusion: progress is patchy.
The survey found that there has been US$7.2 billion invested in renewable energy by the SWF industry since 2015, but this is less than one third of the total invested in the oil and gas industries in that time, according to data from the International Forum of Sovereign Wealth Funds.
Funds in Australia and New Zealand are frontrunners in shifting the emissions intensity of their portfolios (emissions proportional to revenue of their holdings). They expect to cut this by 40% by 2025.
Funds in the Middle East have a bigger hill to climb with a greater reliance on fossil fuels, but they too intend to increase focus on ESG in their investments.
"Sovereign wealth funds are the long-term investment capital of the world, so how they respond to climate change and ESG is the purest case study of how a long-term asset allocator should and does think about these issues, or doesn't," Aniket Shah, Jefferies' global head of ESG and sustainability research told Reuters.
Not all sovereign wealth funds disclose data on their holdings regarding sustainability of their portfolios and their use of ESG factors in investment decisions and analysis.
Of the SWF’s equity holdings, Australia, New Zealand, and Norway came out top based on ESG scores.
How sustainable are sovereign wealth funds? https://t.co/RxNZ1LjJsi pic.twitter.com/Mht4KSXaWN
— Reuters (@Reuters) August 9, 2021
