In 2020, the International Forum of Sovereign Wealth Funds (IFSWF) partnered with the One Planet Sovereign Wealth Funds (OPSWF) Network to undertake the first comprehensive survey of the actions that sovereign wealth funds were taking on climate change. The responses revealed that while sovereign wealth funds understood that they needed to take into account the risks and opportunities of tackling and mitigating climate change for their portfolios, many had only just started putting a climate change policy in place.
In 2021, we revisited the study to chart sovereign wealth funds' progress in this area and found progress in a range of areas including the attitudes of stakeholders, the implementation of climate policies and processes. In 2020, only 24% of respondents to our survey incorporated environmental, social and governance (ESG) considerations in their investment process and only 18% had a dedicated ESG team. Twelve months later, 71% of respondents have adopted an ESG approach and less than 10% told us that they didn’t consider climate change in their investment approach at all.
The results also demonstrated that these investors are investing heavily in building ESG expertise and capacity and are developing a more sophisticated understanding of this approach. The main challenge for sovereign wealth funds is developing appropriate metrics and indicators to measure, manage and mitigate their climate impact.