Sovereign wealth funds dramatically step up their focus on ESG

Sovereign wealth funds are starting to take environmental, social and corporate governance issues a lot more seriously, in a sign that some of the world’s most influential investors may be ready to reallocate their vast fortunes in more planet-friendly ways.

Over 70% of sovereign funds surveyed by the International Forum of Sovereign Wealth Funds and the One Planet Sovereign Wealth Funds group said they now incorporate ESG “considerations” in their investment process, up from just 24% a year earlier, according to a report published on Thursday. At the same time, 41% said they were planning on “upskilling” their investment teams on ESG topics, while 38% said they were either expanding or establishing a dedicated ESG team.

ESG investing has morphed from a niche theory to a US$35 trillion market, with investors of all stripes jumping on the bandwagon amid pressure from clients, shareholders and regulators to take climate change and social justice into account. Sovereign funds, most of which were set up by petrostates, have been among the slowest movers with the governments that oversee them often failing to set greener investment mandates.

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