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Six SWFs unite to address climate change issues

Six sovereign wealth funds governing $2trn (€1.7trn) have formed an alliance to address climate change issues.

The group includes the Abu Dhabi Investment Authority, the Kuwait Investment Authority, the New Zealand Superannuation Fund, Norges Bank Investment Management (NBIM), the Public Investment Fund of the Kingdom of Saudi Arabia, and the Qatar Investment Authority.

Together they have formed the One Planet Sovereign Wealth Fund Working Group to integrate financial risks and opportunities related to climate change in the management of large, long-term asset pools.

The group’s objective is to develop an environmental, social and governance (ESG) framework to address climate change issues and contribute to long-term value creation.

The aim is to publish an ESG framework as well as methods and indicators in 2018.

A statement announcing the working group said it would be crucial in the years ahead for all parties to take urgent action to close the gap between current greenhouse gases emissions and a level on par with limiting global warming below 2°C.

“There is growing evidence that institutional investors that prioritise ESG through ownership and investment are also well positioned to reap financial benefits – and that is the intention of this group,” the statement said.

The group will assist other sovereign funds in exploring ESG frameworks specifically appropriate to their roles and characteristics.

A common platform around the business risks of climate change and the opportunities of an increasingly lower carbon economy did not currently exist among sovereign funds, the group’s statement said.

However, some funds had already taken the lead in advancing ESG issues, it added.

Notable examples included understanding the impact of the transition to a low-carbon economy and the physical risks of climate change on financial markets.

With assets under management projected to reach more than $15trn by 2020, sovereign funds were increasingly prominent in global financial markets, the statement said.

Given their size and long-term investment horizons, they were uniquely positioned to promote long-term value creation and sustainable market outcomes as their future returns were intrinsically linked to global growth and prosperity. 

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