Investing in Planetary Boundaries? Analysing Sustainable Investments of Sovereign Wealth Funds in Europe

Abstract

Sovereign wealth funds constitute the largest accumulation of capital in history. The integration of sustainable investment criteria in sovereign wealth funds is therefore crucial for the financial market's contribution to securing the functioning of Earth systems and thereby a safe operating space for humanity. Such an integration requires an interdisciplinary approach with contributions from both natural science and finance.
The main objective of this qualitative desk study is to analyse the profiles of the four sovereign wealth funds in Europe with the aim of illuminating their different commitments to sustainable investments, both in policy and in practice. More specifically, we discuss these funds’ contributions to global society staying within planetary boundaries. We use the concept of sustainable and responsible investment (SRI) to classify the funds into different generations of SRI funds, with a focus on the environmental sustainability part of SRI.
The results show that three of these four institutional investors in Europe are integrating SRI considerations into their investment strategies, and two of these sovereign wealth funds can be characterized as belonging to advanced generations of SRI funds. Climate change is the planetary boundary which is most integrated into the investment strategies, but there is still limited information about the effect of these strategies.

Keywords: sovereign wealth funds, planetary boundaries, sustainable and responsible investment (SRI), Europe