10 July 2018: To help achieve the goals of the Paris Agreement on climate change, six sovereign wealth funds (SWFs) representing more than US$3 trillion in assets have committed to only invest in companies that incorporate climate risks into their strategies, and have published a framework to this end.

The funds comprise the One Planet SWF Working Group, which was established in December 2017 at the One Planet Summit in Paris, France.

These efforts come during a July of record-breaking extreme heat and disastrous precipitation in the northern hemisphere. According to the World Meteorological Organization (WMO), Japan has suffered the worst flooding and landslide in decades, with more than 150 lives lost thus far. Parts of Oman experienced temperatures of 42°C, Algeria’s Sahara Desert reported 51°C on 5 July, and temperatures in Death Valley, California, US, hit 52°C on 8 July. In Quebec, Canada, a heatwave and high humidity killed dozens, while Eastern Canada experienced wintry weather, a rarity for July. Parts of Europe also experienced drought and heat, with the WMO issuing an advisory through 23 July. [WMO News Story] [UNFCCC Press Release on July 2018 Heat and Precipitation]

SWFs are uniquely positioned to benefit from sustainable markets and to accelerate the transition to a low-carbon economy.

With these record temperatures as a backdrop, French President Emmanuel Macron and Norwegian Prime Minister Erna Solberg convened a roundtable discussion with the One Planet SWF Group on 6 July 2018 in Paris, France, to mark the publication of the One Planet Sovereign Wealth Fund Framework. SWFs are uniquely positioned to benefit from sustainable market outcomes and to accelerate the transition to a low-carbon economy, given their long-term investment horizons and financial risks posed to SWFs by climate change.

Based on the principles of alignment, ownership and integration, the Framework aims to: promote the incorporation of climate change analysis in the management of large, long-term and diversified asset pools; foster a shared understanding among asset owners of climate-related principles, methodologies and indicators; identify climate-related risks and opportunities in investments; and enhance investment decision making to better inform SWF priorities.

In a joint statement, the SWFs underscore that the Framework can help reinforce long-term value creation, improve risk-return profiles and increase long-term portfolio resilience. The statement also urges other other institutional investors to use the Framework to meet their investment objectives.

The One Planet SWF Group includes: the Abu Dhabi Investment Authority, the Kuwait Investment Authority, the New Zealand Superannuation Fund, Norges Bank Investment Management of Norway, the Public Investment Fund of the Kingdom of Saudi Arabia and the Qatar Investment Authority. The Group works with the International Forum of Sovereign Wealth Funds (IFSWF) and other platforms for asset owners to exchange and advance best practices on climate issues. [UNFCCC Press Release on SWFs] [IFSWF Press Release] [One Planet SWF Framework]