Sovereign wealth fund body launches study group on climate change

IFSWF will explore the investment implications of Paris Agreement

The International Forum of Sovereign Wealth Funds (IFSWF) has launched a working group to “explore the investment implications” of climate change and resulting changes in policy and regulation.

The London-based body, which has 30 members and engagement from a number of other wealth funds globally, says it will “introduce members to the major questions raised by this new and important challenge,” referring to the global pledge to curb emissions under the Paris Agreement. It will at first undertake a ‘research and discovery’ process, identifying the “most relevant and pressing challenges and opportunities, with a view to establishing a long-term programme on this subject”.

Some of the wealth funds are already active in the area of climate change. The Ireland Strategic Investment Fund, for example, has a track record of investing in renewable energy, while the New Zealand Superannuation Fund announced last month a new climate change strategy that requires it to undertake carbon foot printing, engage with companies and seek out new low-carbon opportunities. On the other hand, there are wealth funds in the group that have never engaged on the subject, according to insiders. Part of the initial process will be for those more experienced players to share their existing knowledge with the new entrants.

The working group, whose individual members have not been disclosed, expects to present its initial findings at the IFSWF’s next annual general meeting, held in Kazakhstan in September. In 2017/18, it will begin more in-depth research.At its most recent AGM, held in New Zealand earlier this month, the Forum touched on climate change, addressing the opportunities and risks stemming from the Paris agreement and exploring divestment as a subject.

The move into climate research comes alongside the publication of a series of case studies focusing on how member wealth funds have applied the Santiago Principles – a set of practices and guidelines created in 2009 to provide a ‘best practice’ framework for sovereign wealth funds. The principles are signed by all members of the Forum. Self-assessments will take place by 28 of the Forum’s members, and will be published early next year.

“In the eight years since the Santiago Principles were written, our membership has expanded and become more diverse,” said Adrian Orr, chair of the IFSWF and CEO of the New Zealand Superannuation Fund. “As such, our understanding of the real-world implications of applying the Santiago Principles at individual organisations has had to evolve. Each member starts the process of implementing the principles from a different place, depending on their history and legacy structures and what their evolution looks like may not be the same for every member.”