The leaders of Pacific island nations are voicing their opinion on the negative effects of climate change. Many fear rising sea levels will damage their territorial integrity, economy and livelihood. One of the islands, Kiribati, has one of the oldest sovereign wealth funds in the modern age. UN Secretary-General Ban Ki-moon gave a speech touching on that financing will be essentially to advance the support of small island developing states with regard to climate change. Carl Linaburg, chairman of the Sovereign Wealth Fund Institute (SWFI), spoke at the United Nations on June 29th, during the Small Island Developing States (SIDS) event, to talk about institutional investors and climate change. Carl Linaburg invented the Linaburg-Maduell Transparency Index (LMTI), a way of objectively measuring the transparency of sovereign wealth funds with Michael Maduell in 2008.
However, when focusing specifically on the size of the sovereign investor market, he said, “US$ 7.2 trillion dollars is quite a bit of money that could make an impact on climate change for the better or for the worst.”
Linaburg commented on upcoming regulatory changes regarding investment and climate change being brought down by the European Commission. Linaburg mentioned the European Union (EU) wants to reduce its greenhouse gas emissions by a minimum threshold of 40% by 2030. Globally, pension funds like CalPERS, CalSTRS and Korea’s National Pension Service (NPS) are examining how climate change and regulation related to it could impact their portfolios. In addition, asset managers running massive amounts of capital for pensions and wealth funds are taking notice.
Long-Term Institutional Investors Playing a Large Role Combating Climate Change
The SWFI chairman discussed how sovereign wealth funds, pensions and family offices can play a role in the “grand scheme of things.” Linaburg talked about platforms being formed institutional investors such as sovereign funds, foundations, pensions and other long-term investors looking at green investments. However, when focusing specifically on the size of the sovereign investor market, he said, “US$ 7.2 trillion dollars is quite a bit of money that could make an impact on climate change for the better or for the worst.”
Linaburg highlighted, “Another thing that we need to understand about sovereign wealth funds is that these are, indeed, profit vehicles. They are initially set up to provide for their future economies, and typically they are run by former financial gurus who are good at producing a return on investment. These individuals have a lot of pressure not only from their governmental owners but also from the public to produce a positive return on their portfolios. The key to approaching sovereign wealth funds with initiatives like climate change is finding a middle ground.”
He mentioned the growing movement of the Portfolio Decarbonisation Coalition, taking a strong foothold in Europe. This coalition was founded by Amundi, AP4, CDP and the United Nations Environment Programme Finance Initiative. It is a multi-stakeholder initiative that aims to drive greenhouse gas emissions down by assembling institutional investors to gradually embrace the decarbonisation of their portfolios. Linaburg spoke about hearing the speech of Mats Andersson, CEO of AP4, at the SWFI’s Institute Fund Summit 2015 conference in Seoul in April, talk about the buffer fund’s approach on becoming a low-carbon institutional investor.
Sovereign wealth funds are gradually playing a bigger role in the green investment world. Norway’s Government Pension Fund Global has made allocations to environmental investment mandates, while funds like the New Zealand Superannuation Fund (NZSF) have made direct investments in companies like Bloom Energy. According to the SWFI’s Sovereign Wealth Fund Transaction Database, even Gulf funds like Mubadala and the China Investment Corporation have made big bets in renewables.
Turkey Wealth Fund Could Tap Debt Markets in 2019
Turkiye Varlik Fonu or Turkey Wealth Fund could be issuing a large bond in 2019. The loan would most likely be short term in nature with a maturity of two years and be syndicated.
Rahm Emanuel Suggests Bonds to Help Support Chicago Pensions
The outgoing Chicago Mayor Rahm Emanuel revealed a plan on possibly issuing US$ 10 billion in bonds in funding Chicago’s underfunded pension funds. Chicago’s four pension funds have an average funding ratio of 26%. In March 2016, the Illinois Supreme Court ruled an earlier pension reform law effecting employees and laborers’ pension funds that was signed by then Illinois Governor Pat Quinn that the law was unconstitutional.
SoftBank and Alibaba Back PT Tokopedia
PT Tokopedia is an Indonesian generalist e-commerce site. Tokopedia raised US$ 1.1 billion in an investment round led by the SoftBank Vision Fund and Alibaba Group. Softbank Ventures Korea and other investors participated in the round as well. William Tanuwijaya is the CEO and Co-Founder of Tokopedia.
Tikehau Capital and Total SA Form Low Carbon Fund
Tikehau Capital and Total SA created a private equity fund to focus on supporting the energy transition to cleaner sources of energy. The fund held a €350 million first close and raised money from investors such as Bpifrance and Groupama as anchor investors.
The Russian Direct Investment Fund (RDIF) inked a deal with ANAS S.p.A. (formerly known as Azienda Nazionale Autonoma delle Strade), the Italian state highway management company, to implement a concession agreement to build and operate the fourth section of the massive Moscow Central Ring Road. The transaction expects to be finalized in the first quarter of 2019. This is the final section of Central Ring Road, which is 96.5 kilometers long. According to the RDIF, “Under the terms of the concession agreement, the cost of construction is 85.4 billion rubles, of which the concessionaire will provide 49.7 billion rubles and private investors will provide 35.7 billion rubles.”
This long-form podcast was recorded on December 11, 2018. Michael Maduell dissects the latest geopolitical trends that can impact institutional investors such as pensions, sovereign wealth funds, and endowments. Maduell lends his opinion on the lawsuit of Neiman Marcus and bumps in the road for augmented reality.
1:15 Huawei, Canada, Brexit, and Macron Headache
6:30 Sovereign Wealth Fund Asset Allocation
9:58 India Gets a New Central Bank Governor
13:26 Pensions Go Bust on U.S. Retailers
17:04 Augmented Reality and Sovereign Funds
22:00 Former CalPERS CIO Goes to Morgan Stanley Investment Management
24:30 Oman Investment Fund Goes on Defense in Public Markets
25:00 Japanese Scandals and Opportunities
The views in this media are expressed by Michael Maduell and other participants and are not reflective of the Sovereign Wealth Fund Institute (SWFI).
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