Climate-risk plan for sovereign funds

The One Planet Sovereign Wealth Fund Working Group has published its framework for integrating climate-change risks and investing in the smooth transition to a low-emission economy. Now the group is encouraging other large institutional investors to adopt the plan.

The framework is one of the commitments of the SWF working group established at the One Planet Summit held in December last year. It aims to accelerate the integration of climate-change analysis into the management of large, long-term asset pools.

The goal is to help investors identify the exposure of investee companies to climate-related risks, and determine which companies are best prepared to manage or exploit opportunities.

The idea is that SWFs are in a unique position to promote long-term value creation and sustainable market outcomes due to their size and investment horizons, and that the framework will help create consistency and common methods in disclosure, analysis and decision-making around climate-related issues.

The six founding members of the working group, which collectively manage more than $3 trillion, are: Abu Dhabi Investment Authority, Kuwait Investment Authority, the New Zealand Superannuation Fund, Norges Bank Investment Management, the Public Investment Fund of the Kingdom of Saudi Arabia, and the Qatar Investment Authority.

The plan was developed by the founding partners in consultation with other institutional investors. While voluntary, the hope is that SWFs and other large institutional investors adopt it.

The framework sets out guidelines under three principles:

  • Principle one: alignment. Build climate-change considerations into decision-making.
  • Principle two: ownership. Encourage companies to address material climate-change issues in their governance, business strategy and planning, risk management and public reporting, to promote value creation.
  • Principle three: integration. Build the consideration of climate change-related risks and opportunities into investment management to improve the resilience of long-term investment portfolios.

The working group states that the methods it identifies in the framework should help improve the quality of climate-related financial information and support the assessment of climate risks, which will ultimately help investors allocate long-term capital more efficiently.

“By using the framework, SWFs can reinforce their long-term value creation, improve their risk-return profile, and increase long-term portfolio resilience by factoring and integrating climate issues into their decision-making,” the group states. “The One Planet SWF Group hopes that other long-term institutional investors will be able to make use of this framework in the execution of their mandates and investment objectives.”

A number of the founding signatories, including Norges Bank and NZ Super, have been world- leaders in climate-change investment integration (see NZ Super cleans out its carbon, and Norges’ 1-stop shop for risk data).

The One Planet SWF initiative is championed by French President Emmanuel Macron. Earlier this month, he and Norwegian Prime Minister Erna Solberg convened a roundtable discussion with the working groupat the Elysée Palace to mark the publication of the framework.


The framework can be accessed here: One Planet SWF


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