In the face of a rapidly changing global landscape, sovereign wealth funds are stepping up to finance the future, accelerating the energy transition. The Invesco Global Sovereign Asset Management Study for 2023 provides a comprehensive analysis of this trend, offering insights into the strategies adopted by these funds.
The energy transition is a global priority, and financing it is a significant challenge. Sovereign wealth funds, with their substantial share of global assets, are playing a crucial role in this transition. The study reveals that over two-thirds of investors agree that these funds can significantly contribute to financing the energy transition.
The focus on environmental, social, and governance (ESG) factors among sovereign wealth funds has been meticulously documented over the years. The study marks the sixth and largest annual rise in the proportion of these funds implementing ESG policies, rising from 46% in 2017 to 79% in 2023. This growing emphasis on ESG is driven by the intensifying necessity of environmental action and the criticality of energy security.
Investors assert that the ramifications of climate change and the financial cost of the energy transition represent two of the three most significant risks to global growth over the next decade. Sovereign wealth funds are now more resolute than ever in their ambitions to fund the energy transition. They are focusing on direct investment and green bonds to step up funding for the energy transition.
The new generation of sovereign wealth funds, particularly those based in emerging markets, are much more likely to be focused on the energy transition from the outset. These funds are looking to help direct investment towards important parts of the economy that may be underserved or neglected by other types of investors. They are also focused on social objectives such as health and education.
Sovereign wealth funds are playing a crucial role in financing the energy transition. By focusing on direct investment and green bonds, these funds are not only contributing to the global fight against climate change but also driving growth and development in various sectors and regions.
