Arab pension funds are beginning to integrate ESG and SDGs into their investment decisions

Pension funds in Arab countries have begun to integrate environmental, social, governance (ESG) and sustainable development issues into their investment decisions, according to a report by the Arab Monetary Fund (AMF) and the United Nations Program for Development.

However, more progress needs to be made if pension funds are to realize their potential to support the achievement of the Sustainable Development Goals, the AMF and UNDP said on Tuesday.

The SDGs were adopted by the UN in 2015 as a universal call to action to end poverty, tackle climate change and ensure that all enjoy peace and prosperity by 2030.

“Despite significant progress by some funds, if Arab pension funds are to fully play their role in achieving the SDGs while fulfilling their core mission with members, there is a need to go beyond the initial focus on ESG issues and towards stronger alignment with ESG across a wide range of investment decisions,” said Khalida Bouzar, UNDP Regional Bureau Director for Arab States.

Assets under management by the world’s sovereign wealth funds and public pension funds hit a record high of $31.9 trillion in 2021, boosted by a US stock market rally and rising oil prices, the month said. latest a report from industry tracker Global SWF. Assets managed by public pension funds soared 8.7% to $21.4 billion, according to the annual report.

Meanwhile, sovereign wealth fund investments in the ESG space jumped to $22.7 billion at the end of last year, from $7.2 billion in 2020, according to Finbold.com and data from Global SWF.

While many Arab pension funds have taken significant steps to align their investments with ESG principles, others are only at the beginning of the journey, according to the report.

Most funds surveyed cited familiarity with ESG factors and the SDGs, while fewer funds had advanced to deeper levels of ESG alignment.

The report recommends a number of steps that can be taken by governments and regulators, pension funds, global and regional organizations and pension fund advisers to deepen the integration of ESG factors into investment decisions. and link them more closely to the SDGs in the Arab region.

These include adopting internationally recognized reporting standards, developing internal capacity to improve impact management systems, and improving transparency and disclosure.

“Given the growing interest of policy makers, [the] The Arab pension fund industry will see increased development of ESG/sustainable labels in the near future to channel investments into high ESG value assets,” said Abdulrahman Al Hamidy, Managing Director and Chairman of the Board of Directors of the AMF.

Updated: February 09, 2022, 04:54