The Kingdom’s Public Investment Fund has invested more in companies benefiting from a transition away from fossil fuels, mirroring Saudi Arabia’s broader strategy to diversify its economy by avoiding reliance on crude sales.
Saudi Arabia’s $ 430 billion sovereign wealth fund plans to announce its first green debt issue as it seeks to increase the role environmental, social and governance principles play in its investments.
The Public Investment Fund will announce the green issue “very soon,” Governor Yasir Al-Rumayyan said at a virtual event on Tuesday. The PIF, as the fund is known, is also working with BlackRock Inc. on developing an ESG framework, said Al-Rumayyan, who is also chairman of Saudi Aramco, the world’s largest oil company.
A global sales boom is expected to lift ethical debt issuance to $ 1 trillion this year, with UK green bond debuts breaking records this week. A green loan from the PIF would be the first for a sovereign wealth fund and comes as the kingdom, one of the world’s largest oil exporters, seeks to reshape its reputation on environmental issues.
The government is expected to announce the details of its own environmental plans at a conference next month. In September, the Ministry of Finance had already appointed HSBC Holdings Plc and JPMorgan Chase & Co. as joint structuring agents for its sustainable finance framework.
“We are working with many partners around the world, nationally and internationally, for better ESG compliance in all the things we do,” Al-Rumayyan said. As part of developing its own ESG framework, the PIF was seeking to move “gradually” towards rejecting investments that do not have their own sustainability plans, he said.
The PIF has invested more in companies that benefit from a transition away from fossil fuels, reflecting the kingdom’s broader strategy to diversify its economy by avoiding reliance on crude sales. It has increased its stake in ACWA Power International, a Saudi producer that spends heavily on renewables, from solar to hydrogen, and has also invested in electric vehicle maker Lucid.
Meanwhile, Saudi companies have come under scrutiny from other sovereign investors. The Norwegian Ministry of Finance has decided that companies based in the kingdom should not be included in the benchmark used by its heritage fund, according to a white paper published last April which aimed to impose more ethical and environmental standards on its investments.
The kingdom plans to set up a regional exchange for the trading of carbon credits and offsets with the aim of promoting efforts to reduce harmful emissions.
The PIF is teaming up with the Saudi stock exchange, which it owns, to establish the Riyadh voluntary exchange platform, according to a statement released earlier this month. The trade would allow the trading of carbon credits and offsets across the Middle East and North Africa.
Details of the exchange are scarce, however, and the statement does not specify when the trading platform will start or detail how it will work.
PIF also recruited five international banks as members of an ESG panel for its medium-term capital raising strategy, according to Reuters. Saudi Arabia’s wealth fund has already borrowed from global banks, recently raising $ 15 billion from lenders it plans to use to fund new deals.