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Sovereign wealth fund investments in ESG surge 200%

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Sovereign wealth funds are the latest class of investors increasingly focusing on sustainability-centered products. The involvement comes as investors continue to push asset managers to focus on environmental, social, and governance (ESG) products.

According to data acquired by Finbold, sovereign wealth funds investments in the ESG space surged 215.27% between 2020 and 2021, from $7.2 bln to $22.7 bln. Over the same period, the number of deals increased from 19 to 37.

In 2019, the investment stood at $5.2 bln, while in 2018, the figure was $6 bln, a slight drop from 2017’s value of $6.6 bln. Over the last six years, 2016 recorded the least investment at $3.7 bln.

Elsewhere, in 2021, SWFs’ involvement in the oil and gas space (‘black investments’) dropped 46.92% to $6.9 bln from the 2020 figure of $13 bln. Last year also recorded the lowest deals in oil and gas at 8.

In 2019, the investments stood at $12.7 bln. The SWFs also pumped $7 bln in black investments for 2017, dropping from 2016’s value of $10.4 bln.

 

Financial appeal 

The report highlights the implications of increased SWFs investment in various sustainable-focused funds.

“Last year’s growth indicates that the ESG space has a financial appeal for investors, and SWFs play a crucial role,” the research report said.

“In general, the SWFs are uniquely positioned to promote the global environmental, ESG agenda and investing in certain products is the first step.”

The increasing focus on ESGs comes as investors seek to integrate corporate environmental, social, and governance risks hoping to attract better returns. This concept is now rapidly spreading across capital markets globally.