Sovereign Wealth Funds’ investments and climate change

Leonardo Stanley, Francisco Castaã‘eda () and Nassib Segovia ()
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Francisco Castaã‘eda: School of Economics, Government and Communications, Universidad Central de Chile (Chile)
Nassib Segovia: School of Economics, Government and Communications, Universidad Central de Chile (Chile)

No 2406, CIRIEC Working Papers from CIRIEC - Université de Liège

Abstract: In recent decades an important resource-accumulating agent, whose financial investments have spread across the world, has emerged: The Sovereign Wealth Fund (SWF). This capital comes chiefly from economies that control natural resources and from budget surpluses that some nations can generate. The principal players are in the Middle East and Asia, whose resources come from oil and associated exports. SWFs, with their huge investment portfolios, have taken control of companies around the world, becoming, in turn, not just a principal provider of resources for the businesses but also creditors of various countries, with the objective of diversifying their investment portfolios. In practical terms, SWFs are state-owned investment vehicles that invest globally in various types of assets ranging from financial to real to alternative assets. The main purposes for their establishment are stabilising government and export revenues (fiscal), accumulation of savings for future generations in resource-rich countries to offset the future lack of natural resources (savings), and or/the management of foreign reserves. SWFs, however, could be pursuing more than one objective, mixing macro (fiscal, savings, reserves management) and development issues. SWFs are then capable of solving the Dutch Disease that characterise natural resource rich countries, even having a key role in transforming the economic structure. Developmental issues were basically associated with (traditional) industrial policies; SFWs goals, however, have recently, although timidly started to expand to include sustainable goals, as climate change issues. In Latin America, SWFs have mainly pursued macro-stabilization goals, whereas development related objectives are increasingly considered by funds in Asia and Africa. Furthermore, whereas the latter group has timidly begun to explore and invest in "green", Latin America keeps ignoring the issue due to its fiscal restrictions and urgent needs of income.

Keywords: Sovereign funds; Climate change; energy transition; Investments and Financing (search for similar items in EconPapers)
JEL-codes: F3 F55 H23 Q01 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-ene, nep-env and nep-sea
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