Kuwait's Oil Wealth Fund Looks To Be Entirely ESG Compliant

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Kuwait Investment Authority, the sovereign wealth fund of one of OPEC’s largest producers, aims to ultimately make its portfolio 100-percent compliant with environmental, social, and governance (ESG) principles, the fund’s managing director Ghanem Al-Ghunaiman told Bloomberg.

“The process is ongoing with the KIA currently transitioning toward 100% ESG compliance for the entire portfolio while currently focusing on the E part of ESG,” Ghanem Al-Ghunaiman told Bloomberg News.

Kuwait Investment Authority (KIA) is the world’s first-ever sovereign wealth fund created from the riches the country has amassed from its oil sales. Since 1976, Kuwait has been allocating a minimum of ten percent of the state’s annual revenues to a fund for future generations “by diversifying revenue streams and ensuring a fiscally sustainable and secure future.”

According to the Sovereign Wealth Fund Institute (SWFI), the Kuwaiti fund is currently the third-largest in the world, behind only the Norwegian wealth fund and the Chinese fund China Investment Corporation. Kuwait Investment Authority has assets of over $735 billion. 

KIA has started to apply the ESG standard set by an independent globally-recognized ESG benchmark provider, Al-Ghunaiman told Bloomberg, without disclosing the name of said provider.

The fund will target companies “that have recognized and adapted to long-term financial risks and opportunities presented by climate change and resource depletion,” its managing director told Bloomberg, offering a rare insight into the fund’s strategy for the future.   

Meanwhile, the world’s largest sovereign wealth fund, Norway’s $1.3 trillion Government Pension Fund Global (GPFG), is pre-screening companies for sustainability risk before deciding to invest in them and, within one decade, it has divested from 366 firms that it has assessed as lacking sustainable business models.

In 2021 alone, the Norwegian fund assessed sustainability risk across more than 400 companies that were added to the fund’s index, and chose to refrain from investing in nine companies that it believed would increase the fund’s financial risk in the long term, Norges Bank Investment Management said last month in an update on its actions to protect from risks in the long term.

By Charles Kennedy for Oilprice.com

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