Sovereign wealth funds are one of the most recent class of investors to put a premium on environmentally friendly products. Investors keep pushing asset managers to focus on Environmental, Social, and Governance (ESG) products, prompting this participation.

According to Finbold data, sovereign wealth fund investments in the ESG space increased 215.27 percent globally between 2020 and 2021, from $7.2 billion to $22.7 billion. During the same time frame, the number of transactions increased from 19 to 37.

In 2019, the investment stood at $5.2 billion, while in 2018, the figure was $6 billion, a slight drop from 2017’s value of $6.6 billion. Over the last six years, 2016 recorded the least investment at $3.7 billion.

Elsewhere, in 2021, SWFs’ involvement in the oil and gas space dropped 46.92 percent to $6.9 billion from 2020’s figure of $13 billion. Last year also recorded the lowest deals in oil and gas at 8. In 2019, the investments stood at $12.7 billion. The SWFs also pumped $7 billion in black investments for 2017, dropping from 2016’s value of $10.4 billion.

ESG gaining financial appeal 

The report highlights the implications of increased SWFs investment in various sustainable-focused funds. According to the research report:

“Last year’s growth indicates that the ESG space has a financial appeal for investors, and SWFs play a crucial role. In general, the SWFs are uniquely positioned to promote the global environmental, ESG agenda and investing in certain products is the first step.”

In general, the increasing focus on ESGs comes as investors seek to integrate corporate environmental, social, and governance risks hoping to attract better returns. This concept is now rapidly spreading across capital markets worldwide.