Sovereign wealth funds green investments soar

17 Jan 22

Global investments by sovereign funds meeting environmental, social and governance standards more then trebled last year, as Covid-19 accelerated the move away from fossil fuels, according to experts.

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Solar farm

Solar farm. Image ©Shutterstock

In 2021, state-owned investment bodies spent $22.7bn on green projects, including stakes in greenfield assets, shares in listed companies and new climate-focused funds, according to an annual report by industry tracker Global SWF.

The record sum spent last year was more than treble the $7.2bn reported in 2020, as the number of green investments almost doubled year-on-year to 37, the report added.  

The report said: “We are extremely happy to report that state owned investors have, for the first time, invested more capital in renewable energy, than in oil and gas.

“This milestone was a few years in the making and has concluded a trend that has been driven by social pressure and financial returns and accelerated by the Covid-19 pandemic.”

Notable investments include the Norwegian Pension Fund’s 50% stake in the Netherland’s first two offshore wind farms, and the Italian Sovereign Wealth Fund partnering with energy company ENI, to develop renewable energy assets.

Additionally, climate-focused funds, from financial firms Blackrock, Brookfield and TPG, raised close $20bn from wealth funds globally, with more interest expected in 2022, Global SWF added.

The report said: “Sovereign investors are hungry – and pressured – to access and to deploy capital in high-quality, sustainable initiatives, and chances are that reputable managers will be very successful in the subsequent fundraising processes.

“We expect other major players to follow Blackrock, Brookfield and TPG in helping fill the gap in ESG investing in 2022 and beyond.”

Last year, just $6.9bn was spent by sovereign funds on carbon intensive investments, a 46% reduction on the $13bn financed in 2019, and the lowest level in more than six years, the report said.

Assets managed by the sovereign wealth and public pension funds reached a record high of $31.9trn in 2021, with Global SWF forecasting this to reach $53.6trn by 2030.

In November, climate experts voiced their frustrations over the lack of commitment to increased climate finance for poorer nations during COP26, to help tackle climate change.

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