Sustainable investing and SWFs

September 22, 2009

Government-owned institutions are becoming big drivers of sustainable investing — or buying firms which are socially and environmentally responsible, or sectors which tackle climate change or resource scarcity.

Norway’s $400-billion-plus sovereign wealth fund, which is the world’s second largest, is a big advocate of “green” investing, naming and shaming companies which do not fit the investment guidelines set by the government.

The guidelines rule out holding investments in certain firms,  for instance those that produce nuclear arms or cluster munitions, or that damage the environment or abuse human rights.

It has just expelled Israel’s Elbit Systems for supplying surveillance equipment for the West Bank separation barrier.

RCM, equity-management arm of Allianz Global Investors, says that sustainable investment is gaining momentum and offers investors a unique diversifier.

RCM’s sustainability investment fund, which has the French public pension scheme ERAFP among its clients, likes firms which manage Environmental, Social and Governance (ESG) risks or sectors which are engaged in trends such as demographic trends, climate change (eg solar power) or resource scarcity.

Water is one of RCM’s themes — also for Norway’s SWF and other investors — given the limited supply of water and unsustainable global water usage.

The ethical investment policies of Norway’s SWF is closely studied by researchers from Oxford University (who runs Oxford SWF Project) in a new paper just published.

Click here to see the performance of sustainability investing and world stocks.

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