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75% of sovereign wealth funds now integrate ESG

Sovereign-wealth-fundsThree-quarters of sovereign wealth funds now have an ESG policy in place, according to a study by Invesco.

The figure has been steadily rising over previous years, with only 46% of sovereign wealth funds integrating ESG in 2017.

Invesco’s Global Sovereign Asset Management Study 2022 also found that 27% of central banks have adopted a formal ESG policy. This is up from only 11% in 2017.

Just under half (44%) of central banks stated that the Covid-19 pandemic has led to an increased focus on ESG.

However, the majority of central banks still have no organisation-wide ESG policy in place.

Slow pace of change within organisations and lack of government leading the initiative were found to be significant contributing reasons to a lack of ESG policy.

The leading ‘significant’ challenges to ESG investing were considered to be lack of clear regulatory standards followed by quality of data/ratings.

ESG-policy adoption varies by region; the West led the way with 77% of sovereign wealth funds and central banks having an ESG policy, followed by Asia (68%) and the Middle East (55%).

Emerging markets came last with only 30% of sovereign wealth funds and central banks having an ESG policy in place within the organisation.

One Middle Eastern-based development sovereign commenting on the increase in ESG integration said: “Historically, we have been a very low-profile shareholder. However, the regulatory environment has prompted us to take a position, and ESG is becoming a very big deal.

“If you don’t provide a good story to tell the public, the public creates its own narrative, and this narrative is often wrong.”

Invesco questioned 139 chief investment officers, heads of asset classes and senior portfolio strategists from 81 sovereign wealth funds and 58 central banks, altogether responsible for €22.6 trillion in assets.

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