Central banks, wealth funds become greener and more militant – survey

LONDON, July 21 (Reuters) – The COVID-19 pandemic is accelerating the shift of central banks, sovereign wealth funds and public pension funds to greener, more activist investment strategies, one of the biggest annual surveys on their behavior.

The Global Public Investor survey by the Forum of Official Monetary and Financial Institutions (OMFIF) think tank sampled 102 institutions overseeing a total of $ 7 trillion this year to track how the pandemic and other long-term trends affect them.

The survey results, seen by Reuters ahead of its publication on Wednesday, showed the extent and speed at which environmental, social and governance (ESG) factors are now driving investment decisions.

“There has certainly been an acceleration due to COVID,” said OMFIF chief economist Danae Kyriakopoulou.

“At the start (of the pandemic), we thought there would be an emphasis on the short-term, rapid acceleration of recoveries. But in reality, there was this realization that our financial systems are so vulnerable to things outside the financial world “.

In addition to being a store of wealth for future generations, sovereign wealth funds are often used by countries in times of upheaval.

For the first time since OMFIF started asking questions about ESG, the majority of the three categories of global public investors (GPIs) said they are now implementing it in some way. another.

This differed widely across types of institutions, with all pension funds implementing ESG criteria, compared to around two-thirds of SWFs and just over half of central banks.

Central banks made up around 60% of the OMFIF survey sample this year and although many do not invest in stocks or infrastructure projects, green bonds remain their most popular ESG option.

More than a third of the banks polled in the survey now hold it, although some also said that liquidity and the lack of supply of green bonds, especially in dollars, can be a headache.

TIPPING POINT

The survey also showed a trend towards more active shareholding, especially among sovereign wealth funds and public pension funds. Rather than simply excluding polluters, many funds now specifically buy businesses or projects that switch to more sustainable practices from dirtier or less responsible businesses.

There are still obvious shortcomings. The survey found that around 60% of GPIs do not use ESG benchmarks – a sort of shopping list of assets that they can and cannot own – and only 8% have their own. Custom benchmarks.

An Invesco survey earlier this month found that the majority of sovereign wealth funds believe financial markets are fully taking into account the long-term implications of climate change.

Nonetheless, Kyriakopoulou pointed out that one day in May, when a Dutch court ordered Shell (RDSa.L) to cut emissions faster, Exxon Mobil (XOM.N) shareholders challenged the management of elect two new climate-conscious board members and those of Chevron (CVX. N) shareholders opposed his leadership in support of emissions reductions. Read more

“Policymakers and investors should not be surprised by such decisions or decisions. Even if they are drastic and mark a ‘point of no return’, it is clear that momentum for change has been created.”

Reporting by Marc Jones; Editing by Muralikumar Anantharaman

Our Standards: Thomson Reuters Trust Principles.