SUSTAINABILITY TRANSPARENCY IN SOVEREIGN WEALTH FUNDS: BENCHMARK AND CASE STUDY APPROACH

Abstract

The COVID-19 pandemic and the current food, energy, and safety crisis caused by the war in Ukraine strongly affected the existing gap in Sustainable Development Goals funding. Restoring global sustainability progress and the 2030 Agenda requires reshaping responsible investment architecture and rethinking the role of sovereign wealth funds as the largest investors in this process. The current study explores the ways in which the most transparent sovereign wealth funds act towards sustainability values and incorporate environmental, social, governance, and ethical criteria (ESGE) into their investment strategy, portfolio, and reporting. Also, 16 high-ranked funds by the Sustainability Transparency Index (Cavagnetto et al., 2022) were investigated by using the case study and benchmark analysis. Study results demonstrate the similarity of all funds disclosure within some questionnaire criteria like sustainability policy, scoring (voting) rules for decision-making, ESGE criteria, stakeholder engagements, and assurance of the financial information disclosed. Nevertheless, qualitative differences were identified between the sustainability transparency criteria of A and B-ranked funds. There is also huge variation in the implementation of funds’ ethical criteria, sustainability coherence, relevance of sustainability goals, disclosure of specific climate-related goals, and foundation membership criteria. Policy implications derived from the differences in sovereign funds' benchmarks are aimed at enhancing the sustainability context in funds’ operating frameworks, developing impact measurement metrics, prioritizing the most material stakeholder requests, sustainability verification procedures, and standardizing funds’ sustainability reporting. Specific channels, instruments, and regulatory measures towards greater funds’ sustainability transparency and their involvement in bridging the sustainable development funding gap may be the subject of further investigation.

Keywords

• sovereign wealth fund
• responsible investment
• sustainability
• ESG
• SDG
• accountability