Nature and Biodiversity

Sovereign wealth funds are working to become more climate-friendly

The Mamiraua Sustainable Development Reserve is seen in Uarini, Amazonas state, Brazil, May 16, 2016. REUTERS/Bruno Kelly     SEARCH "JAGUARS AMAZON" FOR THIS STORY. SEARCH "WIDER IMAGE" FOR ALL STORIES.

French President Emmanuel Macron wants to lead the way on climate action. Image: REUTERS/Bruno Kelly

Michael E. Rose
PhD Candidate in Economics, University of Cape Town

Sovereign wealth funds managing more than $2 trillion are to lay out a strategy on Friday in Paris to pressure companies to be more climate-friendly, French officials said.

French President Emmanuel Macron gestures as he delivers a speech to entrepreneurs at a convention centre in Lagos, Nigeria, July 4, 2018.  Ludovic Marin/Pool via Reuters
Image: REUTERS

President Emmanuel Macron, who has cast himself as the guardian of the Paris agreement on climate change since Washington announced it would pull out, is championing the initiative, which will bring together the heads of six sovereign funds to thrash out a pro-environment investment framework.

The guidelines, which funds will ask the companies they invest in to meet, are expected to influence other big asset managers, French presidential advisers said.

“Beyond the colossal amounts these funds manage, it’s the snowball effect we’re betting on,” one adviser at Macron’s office said. “By getting them to make this joint pledge, there will be a ricochet effect spreading across global finance.”

With five of the funds coming from oil-rich nations - Abu Dhabi, Kuwait, Saudi Arabia, Qatar and Norway - and the sixth from New Zealand, the Elysee dismissed suggestions the funds could just be opportunistically jumping on the climate bandwagon.

Image: Statista

“They could have told us: that’s none of your business,” the adviser said. “So a big part of our work has been to create trust and show there is political leadership to get them moving, showcase them. It’s not greenwashing.”

Lawrence Yanovitch, an American national who is coordinating the initiative, said the funds understood it was in their financial interest to take account of the risks of climate change in their investments and that most of their countries were already seeking to transition toward low-carbon economies.

“They also see a business opportunity,” the former Bill and Melinda Gates Foundation investment manager said. “Financial markets are risky because they don’t take these (climate) risks into account.”

The guidelines will include obligations for companies to calculate their carbon footprints, he said.

Have you read?

The initiative comes a year after U.S President Donald Trump said the United States, the world’s second biggest greenhouse gas emitter after China, would pull out of the deal brokered in Paris in 2015 to limit global warming to “well below” 2 degrees above pre-industrial times.

Macron took a dig at Trump at the time, saying he would not give up the fight and will “make our planet great again.”

That, and Macron’s background as a former investment banker, encouraged the sovereign funds to work with France on the framework, Yanovitch said.

“They see him as a committed leader on climate,” he said. “He’s got this background, he’s a banker. He understood that the funds were the strategic entry point. If you motivate them, it will cascade down.”

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Stay up to date:

Long-Term Investing, Infrastructure and Development

Share:
The Big Picture
Explore and monitor how Social Protection is affecting economies, industries and global issues
World Economic Forum logo

Forum Stories newsletter

Bringing you weekly curated insights and analysis on the global issues that matter.

Subscribe today

How greenways can boost nature-positive living by shaping urban mobility

Federico Cartín Arteaga and Heather Thompson

December 20, 2024

2:29

5 top nature stories of 2024

About us

Engage with us

  • Sign in
  • Partner with us
  • Become a member
  • Sign up for our press releases
  • Subscribe to our newsletters
  • Contact us

Quick links

Language editions

Privacy Policy & Terms of Service

Sitemap

© 2024 World Economic Forum