Sovereign wealth funds invest in climate technology and renewable energy


Sovereign wealth funds are increasing their investments in the energy transition.

Custodians of national wealth invested $ 2.3 billion in 2020 in sectors important to tackling climate change, including forestry, renewables and so-called agritech, according to a report released Tuesday by the International Sovereign Wealth Fund Forum, a network of sovereign wealth funds from Abu Dhabi to Singapore. That’s more than double the $ 1.1 billion invested in 2019, according to IFSWF data.

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The transition to a low-carbon future is a necessity if the worst effects of global warming are to be avoided, and investors of all stripes face increasing pressure to play their part in funneling trillions of dollars of investment. necessary to enable a switch from fossil fuels. So far, SWFs have mostly lagged behind, with The IFSWF found in February that only 30% of a group of 34 responding institutions had more than 10% of their portfolios invested in climate-related strategies.

The IFSWF said that while SWFs are “rarely a trailblazer,” technologies that help reduce carbon emissions or help economies adapt to the effects of climate change “are becoming a clear investment trend” for funds. While $ 2 billion is only a fraction of the assets managed by sovereign wealth funds, this is a fourfold increase from 2016, when investments stood at $ 734 million.

“Over the next 10 years, the best investment opportunities will be in climate change and related technologies,” said Heenam Choi, Managing Director of Korea Investment Corp. “The pandemic has highlighted the importance of sustainability. We will continue to develop our ESG investments. “

Sovereign investors are increasingly willing to invest in renewable energy assets because the technology has matured and they have become profitable in the short to medium term without requiring government subsidies, the IFSWF said. In addition, global demand for electricity is increasing due to the energy transition and the electrification of transport, which is expected to send more capital to the sector and lower costs further.

Investments that reduce the environmental impact of food production are also gaining traction as part of climate change investment strategies, the IFSWF said. Agriculture and food production already matter towards With around a fifth of global carbon dioxide emissions and the world’s population set to grow further, investors are turning to agro-tech companies that are developing new forms of nutrition or food production.

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