Context
Over the past five years, investors have increasingly recognised that they need to consider the impact of climate change as they allocate capital. It is now mainstream for asset owners and asset managers to integrate environmental considerations into their investment processes.
Sovereign wealth funds have also begun to take environmental issues seriously. However, despite the formation of the One Planet Sovereign Wealth Fund Group and several other sovereign wealth funds disclosing their approach to climate change, sovereign wealth funds are largely characterised as being unresponsive to the need to think about climate change in their investment processes.
Aim
To help market actors and researchers gain greater insight into how sovereign wealth funds are aligning their portfolios with climate change considerations and integrating these into their investment process the One Planet Sovereign Wealth Fund Group is partnering with the International Forum of Sovereign Wealth Funds to collaborate on a research project to reveal a more complete picture of the action sovereign wealth funds have taken in this regard.
The project will seek to demonstrate these investors’ progress to date and act as a learning tool for those sovereign wealth funds nearer the beginning of their journey thinking about climate change as a material risk and its mitigation an opportunity for their portfolios. As such, it will reframe out-of-date narratives in the market. Ideally, we will re-calculate the proportion of sovereign wealth fund portfolios aligned with climate change, challenging the 1% figure recently published by the Organisation for Economic Cooperation and Development (IFSWF data shows this to be almost three times as much, but is not able to include listed strategies) and accusations of inaction.
Through this research, IFSWF-OPSWF can also identify persistent gaps in market action and could use this exercise to drive future collaboration and capacity building within the sovereign wealth fund market.
Approach
The combined team will develop an online survey that will be distributed to IFSWF members and OPSWF members, which are not members of IFSWF. The survey will seek to identify the institutions’ attitude to climate change and the extent to which climate-related practices are being implemented. The survey will be augmented by semi-structured interviews with appropriately responsible individuals at sovereign wealth funds and leading asset managers to gather additional evidence of investment strategies and market trends. This can build out specific anecdotes and case studies of action. Both the survey and interviews will be carried out on an anonymous and aggregated basis.
We will also seek to integrate insights from other data sets such as the IFSWF database, PRI data (if possible) and proprietary datasets held by partners to compare SWFs to other asset owners.
Timeline
- July / August 2020 – IFSWF/OPSWF secretariats to draft survey and interview questions
- September 2020 - IFSWF/OPSWF secretariats to carry out survey and interview research with members
- October 2020 – data analysis and write-up
- November 2020 – plan communication strategy and launch publication (possibly at OPSWF Annual Summit)