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Central banks, wealth funds shifting to greener investments

Central banks, wealth funds shifting to greener investments

Mubasher: The coronavirus (COVID-19) pandemic is accelerating the transition of central banks and sovereign wealth and public pension funds to greener and more activist investments, according to the Global Public Investor survey by think-tank Official Monetary and Financial Institutions Forum (OMFIF) as cited by Reuters.

The Global Public Investor survey has tracked 102 institutions overseeing a combined $7 trillion in 2021 to witness the impact of the pandemic and other long-term trends on them and show how environmental, social, and governance (ESG) factors are affecting their investment decisions.

For the first time, OMFIF found that the majority of all three categories of global public investors (GPIs) have begun to go greener and more activist in their investment strategies.

All pension funds are following ESG criteria, compared with around two-thirds of sovereign funds and just over half of central banks, according to the survey, seen by Reuters ahead of its publication on Wednesday.

Meanwhile, many funds are now purchasing companies or projects that enable them to shift to more sustainable practices.

Central banks, which represent up around 60% of OMFIF’s survey sample this year, focus more on green bonds as their ESG option, as more than a third of the banks are now holding these bonds.

However, some banks expressed their concerns over liquidity and lack of supply of green bonds, namely in dollars.

Despite these findings, clear gaps are still being witnessed, as around 60% of GPIs in the survey didn’t use ESG benchmarks and 8% had their own bespoke benchmarks.