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The times are they a-changin’? Tracking sovereign wealth funds’ sustainable investing

Author

Listed:
  • Bernardo Bortolotti

    (Bocconi University
    NYU Abu Dhabi)

  • Giacomo Loss

    (Bocconi University
    NYU Abu Dhabi)

  • Robert W. Zwieten

    (NYU Abu Dhabi
    Asian Institute of Management)

Abstract

This paper analyzes the orientation towards sustainable investment by global sovereign wealth funds (henceforth SWFs) over the last two decades. Our data analysis reveals that over the last 5 years, there has been a noticeable uptick in investing along the Sustainable Development Goals (henceforth SDGs) by SWFs. From 2018 onwards, momentum has been building in climate and energy, especially in deal value. We also see agriculture come to the fore in 2020, and to a lesser degree, investments in education, as SWFs appear to extend their investment remits slowly but surely into other long-term investment themes. The paper also provides preliminary descriptive evidence about the drivers of sovereign sustainable investment, showing that the presence of explicit environmental, social, and governance (henceforth ESG) policies in place favor capital deployment aligned with SDGs. Finally, the paper studies the ESG performance of a sub-sample of listed firms that SWFs have invested in, finding a significant deterioration in the governance pillar. This result is broadly consistent with previous research on the agency costs of sovereign ownership. The paper concludes by making policy recommendations regarding fiduciary duty, investee corporate governance, and climate investments, which would contribute to modernizing the role of SWFs in the global economy.

Suggested Citation

  • Bernardo Bortolotti & Giacomo Loss & Robert W. Zwieten, 2023. "The times are they a-changin’? Tracking sovereign wealth funds’ sustainable investing," Journal of International Business Policy, Palgrave Macmillan, vol. 6(3), pages 276-305, September.
    • Handle: RePEc:pal:joibpo:v:6:y:2023:i:3:d:10.1057_s42214-023-00161-4
    DOI: 10.1057/s42214-023-00161-4
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    References listed on IDEAS

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    1. Florian Berg & Julian F Kölbel & Roberto Rigobon, 2022. "Aggregate Confusion: The Divergence of ESG Ratings [Corporate social responsibility and firm risk: theory and empirical evidence]," Review of Finance, European Finance Association, vol. 26(6), pages 1315-1344.
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    Cited by:

    1. Narjess Boubakri & Veljko Fotak & Omrane Guedhami & Yukihiro Yasuda, 2023. "The heterogeneous and evolving roles of sovereign wealth funds: Issues, challenges, and research agenda," Journal of International Business Policy, Palgrave Macmillan, vol. 6(3), pages 241-252, September.

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