Sovereign asset managers raise ESG focus in wake of COVID-19, finds Invesco survey

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Around a third of central banks and sovereign wealth funds have raised their focus on environmental, social and governance issues over the past year as the COVID-19 pandemic highlighted issues ranging from carbon emissions to inequality, an Invesco survey found.

A total of 63% of central banks responding to the survey felt tackling climate change fell within their mandate, with nearly half believing that mitigating the consequences of climate change should be a monetary policy objective.

In the latest step by a major central bank to curb carbon emissions, the European Central Bank said last week it will take greater account of climate change in its core policy decisions.

More than half of central banks and sovereign funds responding to the Invesco Global Sovereign Asset Management Study said they had specific ESG policies, up from 44% in 2019’s survey.

The asset manager surveyed 141 chief investment officers at a mix of sovereign wealth funds and central banks, managing around $19 trillion in assets in total on topics ranging from ESG to China and liquidity.

The pandemic had accelerated underlying ESG-related issues as disruptions to economic activity lowered carbon emissions, while the health crisis and rise in unemployment shone a light on inequality.

“The pandemic has definitely accelerated the ESG focus,” said Rod Ringrow, Invesco’s head of official institutions.

“What we’re seeing is a greater social conscience and the need to incorporate it now as a matter of course and the pandemic may have been the catalyst to this ‘build back better’ approach.”

More central banks are also keen to consider the climate when investing, with 64% of respondents agreeing that green bonds were a desirable foreign reserve investment.

The People’s Bank of China has said it increased the share of green bonds in its foreign exchange reserve investments while controlling investments in high-pollution assets.

Sovereign funds too are pushing on in scouting out sustainable investment opportunities.

The survey showed 52% of sovereign fund respondents said improving returns was their current motivation for adopting ESG policy, marginally more than the number who cited reducing risk as the biggest driver.

And 57% of sovereign funds responding said the market had not fully priced in the long-term implications of climate change, offering opportunities for higher returns.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.