swfs and sustainable infrastructure

Profiling Sovereign Wealth Funds for Sustainable Infrastructure Investment Saifeng Mao and Joscha Schmitz

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In This Report

1. About ARISE

2. Executive Summary

3. Introduction: SWFs and Sustainability

4. 25 SWFs scored and ranked

5. 10 SWFs profiled and categorized

5.1. Mubadala 5.2. Kuwait Investment Authority 5.3. Norway GPF-Global 5.4. China Investment Corporation 5.5. Korea Investment Corporation 5.6. Qatar Investment Authority 5.7. Abu Dhabi Investment Authority 5.8. Australian Future Fund 5.9. Temasek Holdings 5.10. Singapore GIC

6. Conclusion

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7 9 10 12 14 16 17 19 21 23

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About ARISE

Accelerating Resilient Infrastructure Investment for Sustainability Economies (ARISE) seeks to support the acceleration of capital flows from SWFs into resilient and sustainable infrastructure investments. Partnering with the Rockefeller Foundation, the Energy Resources and Environment (ERE) Program at the Johns Hopkins School of Advanced International Studies (SAIS) is working to launch a process and high-level working group that brings together SWFs, Multilateral Development Banks and other stakeholders. On the course toward Rio20+, ARISE is also providing analysis to identify and remove barriers to investment and developing metrics and methodologies to benchmark the sustainability of infrastructure investments. Key partnerships have been explored with Mubadala, the World Bank, the Islamic Development Bank and the Brazilian Development Bank. A significant partnership has been established with the Office of International Affairs at the EPA.

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Executive Summary

This report evaluates 25 Sovereign Wealth Funds (SWFs) for their potential as long-term investors into sustainable infrastructure. While the enormous global demand for infrastructure investments creates opportunities for accelerating sustainability and resilience, serious bottlenecks exist in raising appropriate levels of financing. Long-term investors such as SWFs can potentially play an important role in channeling significant resources into sustainable infrastructure projects. SWFs are moving into the focus not only because of their large assets under management, which exceed $4.5 trillion for the 25 SWFs covered in this report, but also because fund managers are progressively looking into new high-growth investment opportunities. Yet formidable challenges in engaging SWFs remain. In particular, an incomplete understanding of the funds’ actual objectives, strategies and operations can obscure those forms of cooperation that yield positive returns to all parties. To successfully engage SWFs, it is necessary to tailor engagement strategies to the particular requirements of funds. This process begins with the realization that SWFs are not a monolithic investor group, but in fact differ widely in their missions, structures and investment strategies. The report finds significant variation in the match between individual SWF profiles and the particular requirements of sustainable infrastructure investments. Using a scoring methodology, the portfolios and operations of funds are evaluated according to five criteria indicating investment flexibility and capability (equity share, alternative assets, emerging market exposure, internal management and transparency) In-depth profiles of the ten highest-ranked SWFs then provide the basis for a further classification of the potential partners. We propose that the attractiveness of individual funds can be usefully approximated by its degree of investment flexibility and emphasis on sustainability. When locating the top-ranked SWFs along these two axes, we identify four archetypes of funds: Committed funds (high sustainability but low flexibility), Entrepreneurial funds (high sustainability and high flexibility), Opportunistic funds (low sustainability but high flexibility) and Observing funds (low sustainability and low flexibility).

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Introduction Global demand for infrastructure will require enormous investments over the decades to come. Crucially, this demand is increasingly driven by megatrends with pronounced developmental components such as urbanization and climate change adaptation. The IEA estimates that investments in the energy industry alone will exceed $1 trillion per year until 2030. Transport infrastructure will add another $500 billion per year. While posing a formidable challenge, these trends also create opportunities for sustainable investments. It is widely accepted that financing will increasingly have to come from sources other than the public sector. Yet raising private capital has been challenging, not least because the long-term investment outlook for infrastructure is often at odds with the short-termism that has become the rule in private markets. Increasingly, attention has therefore been shifting to institutional investors with a long-term horizon, including Sovereign Wealth Funds (SWFs). SWFs are moving into the focus not only because of their large means (exceeding $4.5 trillion for the 25 SWFs covered in this report), but also because these funds are progressively looking into investment opportunities beyond traditional international financial markets. This creates the potential for new partnerships for resilient and sustainable infrastructure investments between SWFs and other stakeholders. While SWFs can potentially play an important role, it is crucial not to deemphasize the challenges that remain in engaging these investors. It would be misguiding to present SWFs as investors with unrestrained or unconditional funds for example. First, most funds have very strict guidelines on permissible asset types, sectors and expected returns. Second, depictions of SWFs as pools of spare resources are a misnomer. Funds are typically fully allocated and new investments may require the shifting of existing investments (above new capital inflows). To overcome these challenges and successfully engage SWFs, we need to properly understand their requirements. A first important realization is that funds differ significantly in their missions, structures and investment strategies. Given the particular requirements of investments into sustainable infrastructure, some funds will be better prepared to engage these opportunities than others. In simplified terms, we can expect stronger interest from SWFs that have comparatively higher risk-return profiles, considerable investment flexibility and an interest in sustainability. What is needed to involve a growing number of SWFs in ARISE, and in sustainable infrastructure in general, is a first approximation of how attractive such investments are to individual funds. Such an analysis will also serve as a first primer on how well individual SWFs fit as partners. This report accordingly presents and evaluates SWF profiles, following a two-stage filtering approach. It first scores and ranks 25 SWFs according to criteria that measure the funds’ attractiveness as partners. Detailed profiles on investment strategy and sustainability policy then follow for the ten highest-ranking SWFs. These profiles permit a further classification of SWFs in a matrix between investment flexibility and emphasis on sustainability.

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25 SWFs Scored and Ranked

The shared umbrella term for SWFs should not obscure the fact that basic structures and strategies of funds vary considerably. Most importantly, funds differ greatly in the asset composition of their investment portfolio, in the sectors and markets they invest in, and in how investments are managed. Variations in investment strategies are mainly driven by differences in risk appetites but also by government objectives, historical path dependencies and institutional capabilities. For the purposes of investing in sustainable infrastructure, we suggest that three criteria describing the portfolio and two criteria describing the operations of SWFs are particularly relevant: > Equity share: The share of equity investments in the total asset

portfolio gives some indication of risk appetite. Portfolios in which equity shares dominate fixed-income assets have a comparatively higher tolerance for market risk. This comprises chiefly public equities.

> Alternative asset share: The share of assets other than fixed-income

and public equity can indicate an ability (or willingness) to engage in non-standard investments. This concerns primarily private equity, real estate and infrastructure investments (and less hedge funds or currencies, which are sometimes denoted alternative assets).

> Emerging market exposure: The share of the asset portfolio

invested in emerging markets indicates experience with country-risk analysis and a willingness to embrace high-growth markets.

> Internal asset management: The share of funds that is managed and

allocated internally can serve as a proxy for organizational capability, especially in terms of investment and risk appraisal. It may also indicate some degree of discretion in the investment process.

> Transparency: Transparency serves as a proxy for openness to

partnerships, which can require the sharing of some information. The level of transparency may also be relevant for the acceptance by other stakeholders and simply for practical purposes such as dialogue.

We have scored and ranked 25 SWFs according to these criteria on a scale from 0 (low) to 10 (high). Equity share and emerging market exposure are deemed fundamental and receive double-weighting. A score of 8 for ‘equity share’ would for example indicate a comparatively high share of equities in a fund’s portfolio. The scoring was done on the basis of desk research using annual reports, news and other publicly available information. Transparency was scored using an average from previous scores from Sovereign Wealth Fund Institute and Truman.1 It is important to point out that the scoring is at least in part subjective. In individual cases it may be impossible to ascertain if any one criteria is best-represented by a score of 4 or 5 for instance, because SWFs report information incompletely and unequally. Yet this methodology is useful for suggesting what to look for in SWFs and providing a first approximation of how funds compare to each other in these categories.

1 E. Truman, SWFs: threats or salvation? (Washington DC, Peterson Institute, 2010).

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Figure 1: SWF Ranking

Weight 2 1 2 1 0.5 0.5

1 UAE – Abu Dhabi Mubadala Development Company 7.77 7 9 8 7 10 6.8 $46.00 2002 Oil 2 Kuwait Kuwait Investment Authority 7.34 8 7 8 7 6 4.8 $296 1953 Oil 3 Norway Gov. Pension Fund – Global 7.29 6 7 8 6 10 10 $611 1990 Oil 4 China China Investment Corporation 7.21 8 8 8 4 7 5.9 $440 2007 Other 5 South Korea Korea Investment Corporation 6.82 7 5 7 8 9 4.5 $43 2005 Other 6 Qatar Qatar Investment Authority 6.66 8 7 7 7 5 0.2 $85 2005 Oil/LNG7 UAE – Abu Dhabi Abu Dhabi Investment Authority 6.46 7 7 8 6 4 0.4 $627 1976 Oil 8 Australia Australian Future Fund 6.11 7 8 4 4 10 7.5 $73.00 2004 Other 9 Singapore Temasek Holdings 6.06 6 6 5 6 10 6.8 $157 1974 Other 10 Singapore GIC 5.72 7 6 4 6 6 6.1 $247.50 1981 Other 11 New Zealand Superannuation Fund 5.57 4 5 5 6 10 10 $13.50 2003 Other 12 CN Hong Kong Hong Kong MA 5.56 5 4 4 9 8 7.9 $293 1993 Other 13 France Strategic Investment Fund 5.14 9 3 0 7 8 ** $28.00 2008 Other 14 Bahrain Mumtalakat Holding Company 5.09 8 1 3 6 9 4.3 $9.10 2006 Other 15 Ireland National Pensions Reserve Fund 5.04 5 6 4 2 10 8.6 $30.00 2001 Other 16 Brazil Sovereign Fund of Brazil 5.00 7 1 4 6 6 ** $11.30 2008 Other 17 UAE – Dubai Investment Corporation of Dubai 4.72 8 2 3 6 4 2.1 $70.00 2006 Oil 18 Malaysia Khazanah Nasional 4.69 5 5 4 5 5 4.6 $36.80 1993 Other 19 Azerbaijan State Oil Fund 4.49 3 3 4 5 10 8.9 $30.20 1999 Oil 20 Kazakhstan Kazakhstan National Fund 4.46 4 4 4 5 6 6.4 $38.60 2000 Oil 21 China National Social Security Fund 4.23 4 2 4 5 5 8.2 $134.50 2000 Other 22 Chile Stabilization Fund 3.47 2 2 2 5 10 8.6 $21.80 1985 Copper 23 Russia National Welfare Fund 3.43 5 1 1 6 5 5 $149.70 2008 Oil 24 China SAFE Investment Company 3.14 2 2 3 8 2 * $567.90 1997 Other 25 Saudi Arabia SAMA Foreign Holdings 2.86 4 1 2 3 4 * $523.80 1952 Oil

*=not considered SWFs by Truman **=not considered by Truman

Year Created

SWF Type

Equity Share

AlternativeAssets

EM exposure

Inhouse Mgmt

Transp.(SWFI)

Transp.(Truman)Sovereign Wealth FundCountryRank

TOTALSCORE

Funds ($bn)(partly SWFI)

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10 SWFs Profiled and Categorized

It has been suggested that investment flexibility and emphasis on sustainability are determining drivers of SWF partnering attractiveness. The five criteria used for the first ranking already provide a first approximation of the match between individual funds and sustainable infrastructure investments. It also serves to narrow further analysis to a manageable list of best-fit candidates. In a second step we evaluate the ten top-ranked SWFs for their profile in terms of investment flexibility and sustainability. This cut-off point does not signal a hard break and engaging other funds after further investigation may prove similarly fruitful. Using slightly modified categories, we provide information on the top-ranked funds in terms of their: > Equity Investments and Risk-Return Profiles > Sustainability Policy and Investments > Emerging Markets and Geographic Profile > Investment Flexibility and Asset Classes > Internal Management Capabilities We can use these insights to further categorize the top-ranked SWFs into four types in the flexibility-sustainability matrix (see Figure 2 below). Entrepreneurial SWFs have high investment flexibility and actively invest in sustainable assets. Committed funds have strong sustainability policies but are restricted by their investment mandates and risk-return profiles. Opportunistic SWFs have high investment flexibility but do not follow a comprehensive sustainability strategy – these funds may consider investments on an opportunistic basis. Observing funds are still not entirely prepared to consider sustainable investments but show potential.

Figure 2: SWF Types

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Abu Dhabi $46 billion

Mubadala Mubadala follows a highly entrepreneurial investment strategy with a pronounced focus on sustainable investments, although mainly in the Gulf region. It differs from many conventional SWFs in its investment objectives, leverage of debt capital and comprehensive disclosure. It is also unique in that it actually owns and operates a renewable energy developer. With $46 billion under management, Mubadala is among Abu Dhabi’s smaller investment vehicles. Yet the fund, which was established in 2002 as a more risk-taking alternative to ADIA, is expected to receive a growing share of state revenue and gain in importance. Mubadala’s mission is to aid the diversification of Abu Dhabi’s economy and yield both commercial and social returns, including knowledge transfer and the build-up of social and industrial infrastructure. The fund is highly transparent about its operations, which is a necessary part of its strategy to raise debt capital from international financial markets.

Equity Investments and Risk-Return Profile

Mubadala’s investment portfolio is entirely comprised of equity investments, indicating a very high risk tolerance. Total assets have grown strongly in recent times, increasing by 67% from the end of 2010 to mid-2011.2 As Figure 3 below illustrates, however, this has been mainly the result of large investments in selected sectors, most notably semiconductors. Mubadala’s risk appetite is echoed in the formulation of its investment strategy, which states that the fund looks at equity stakes for the long term, while recognizing that this may be subject to short term volatility. In 2010, Mubadala earned $307 million on total assets of $27.6 billion (1.1%), but reported negative comprehensive net income of -$85.7 million. In 2009 it made a profit of $1.5 billion (6.25%) and $2.5 billion (10.4%) in comprehensive income on assets of $24 billion.

Figure 3: Revenues and Assets

Sustainability Policy and Investments

Mubadala maintains a pronounced focus chiefly through its subsidiary Masdar, a diverse outfit that comprises three commercial business units, a financial investment arm and a university.

2 Unless cited otherwise, facts and figures for Mubadala are sourced from Mubadala’s Annual Report 2010, Mubadala’s Financial Planning & Analysis as presented at IMA Conference in May 2011, Mubadala’s Stakeholder update call of 27 September 2011 and Mubadala’s website.

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Masdar Power builds and invests in utility scale renewable energy power projects. The business unit is for example developing a 100 MW CSP facility and a 30 MW PV in Abu Dhabi as well as a wind park in the Seychelles. It has also invested in large offshore wind projects in the UK along with leading European utilities. Masdar Capital has launched two $250 million funds to invest in renewable energy and clean tech equities, the Masdar Clean Technology Fund (MCTF), launched in 2006, and the DB Masdar Clean Tech Fund (DBMCTF), launched in 2009. Mubadala is also a member of the Abu Dhabi Sustainability Group, an initiative of the Abu Dhabi Environment Agency to promote sustainability principles and practices.

Emerging Markets and Geographic Profile

The vast majority of Mubadala’s assets are located in Abu Dhabi, including major revenue generators such as the Dolphin pipeline. The fund has some notable investments in emerging markets, including stakes in a gas-fired IPP power project in Algeria, stakes in the Guinea Alumina Corporation, and investments into telecom in Nigeria and energy assets in Indonesia and Kazhakstan. Most recently, Mubadala invested $2 billion into the Brazilian industrial conglomerate EBX, which has interests primarily in mining, energy and power generation.3

Investment Flexibility and Asset Classes

Mubadala differs from traditional SWFs in that it is more of a private equity and strategic investment play. It has exclusively invested into equities, in varying forms, including public shares in blue-chip companies such as General Electric, direct equity investments in companies and contributions to private equity houses such as Carlyle Group. Mubadala also differs from many SWFs in that it has full control over some of its companies. Investments have concentrated on six core businesses: aluminum, healthcare, education, semiconductors, aerospace and media. It also has a legacy of property investments in Abu Dhabi, but many of these investments are underperforming and the fund is turning its back on domestic real estate. Mubadala’s infrastructure investments are highly concentrated in form of three universities in the region.

Internal Management Capabilities

Mubadala manages all of its investments internally and has experienced dynamic growth from 50 employees in 2002 to over 700 employees in 2011. If you compare this to the 1,200 employees of ADIA, which manages investments about fifteen times the size, the active approach becomes strikingly clear.

3 http://www.washingtonpost.com/business/abu-dhabi-fund-mubadala-buys-56-percent-stake-in-brazilian-conglomerate-ebx-for-2-billion/2012/03/26/gIQAj7wrbS_story.html

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Kuwait $296 billion

Kuwait Investment Authority (KIA) The Kuwait Investment Authority (KIA) pursues an active investment strategy in a variety of asset classes, but is generally very discrete about its operations and does not have a publicly communicated sustainability strategy. As the longest-running SWF in the Gulf region, the KIA has reached a size of $296 billion since its creation in 1953. It continues to grow as Kuwait transfers 10% of annual petroleum revenues to the fund. The facility in fact comprises two funds: the Reserve Fund (holding government assets such as public enterprises) and the much larger Fund for Future Generations (holding about 80% of assets in different investment classes). KIA is known to be highly guarded about its operations and employees are in fact prohibited by law from making public statements about the fund. Yet recently KIA has begun publishing rudimentary information such as assets under management and returns achieved.


KIA has a moderate to moderately-high risk-profile under which more than 50% of assets are invested in equities, and about 30% in fixed-income assets.4 Equity includes large shares in public equities such as Daimler, Gulf Bank and formerly Citigroup. KIA actively manages its investments with the goal to outperform benchmark indexes. Fund management states its return expectations for alternative assets, summarized in Figure 4.

Figure 4: Assets and Returns

Assets Excess Return Benchmark Index Private Equity 500 bps 10-year rolling S&P 1200

Global Real Estate 125 bps UBS Global Real Estate Hedge Fund 100 bps HFRT1 Fund of Funds


KIA does not have a publicly communicated sustainability policy. In 2009, the fund’s managing director commented on renewable energy investments, stating that “KIA will not hesitate in investing in this new sector if the viability of these investments and long-term returns were proved”.5


Most of KIA assets are invested overseas, following a stated strategy of diversifying funds geographically based on world GDP contributions. Investments are primarily allocated in developed markets with a mandate to outperform the MSCI Developed World Index, but a smaller portion is also allocated to emerging markets. Special focus countries are China and India. In 2011 KIA set up a Beijing office and secured Chinese regulatory approval to invest up to $300 million in yuan-denominated stocks and bonds, having asked for as much as $1 billion. KIA is also said to have $1 billion in Indian equity, where domestic mutual fund houses to manage its equity portfolio. KIA recently pledged to buy into the Indian state oil and gas company.6

4 Unless cited otherwise, facts and figures for KIA are sourced from KIA’s website and D. Fernandez and B. Eschweiler, “Sovereign Wealth Funds: A Bottom-up Primer”, JP Morgan Research Note, May 2008. 5 http://af.reuters.com/article/idAFLT54295120090929 6 Gulf SWFs increasing allocations in India – KCIC Kuwait News Agency [Safat] 30 Jan 2012.

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KIA is very discrete about its investment operations. Yet it is known that in organizational terms, KIA maintains a department for alternative investments, which comprises branches for private equity, real estate investments and hedge fund investments. The fund is generally viewed as a leading investor into private equity, having allocated as much as $30 billion to this asset class.7 In 2011, KIA further announced that it would invest US$3.6 billion in local real estate market in Kuwait.8


The majority of KIA’s portfolio investments are managed by external managers, yet the fund maintains a designated vehicle in the form of the Kuwait Investment Office (KIO), a London-based subsidiary of KIA.

Norway $611 billion

Government Pension Fund (GPF) Under its very long reach, the Norwegian Government Pension Fund (GPF) actively promotes the sustainability of investments. Its moderate risk portfolio however poses some challenge to investing in sustainable infrastructure. The GPF, created in 1990 and now overseeing some $611 billion in funds, in fact comprises two funds, the large GPF-Global and the smaller GPF-Norway. Norway’s government has mandated GPF-Global to buttress government savings for future pension expenditures and manage petroleum revenues over the long-term. While ownership lies with the Norwegian Ministry of Finance, the GPF-Global is managed by Norges Bank Investment Management (NBIM), an arm of the central bank. The fund’s management and investment allocation is highly transparent.


The Ministry of Finance manages the risk-profile NBIM is allowed to take on by prescribing eligible asset classes and geographies. In principle, GPF-Global has a comparatively moderate appetite for risk, i.e. undertaking significant investments into public and often well-established equities. In 2011, GPF-Global had 60% (then $300 billion) of its funds invested into equities and owned shares in about 8,500 listed companies in nearly 60 countries.9 The equity portfolio breaks down into a variety of sectors, led by financial services (HSBC), industry, oil and gas (Shell), consumer goods (Nestle) and basic materials (see Figure 5). Returns on these sectors varied widely in 2010 and especially financial holdings performed poorly. The performance of equity investments is measured against a benchmark, the FTSE Equity Index. NBIM employs an active management strategy with the goal to outperform this benchmark return. Figure 5 shows the development of equity returns against the benchmark from 2005-2010. Most recently, NBIM reported a tough Q3 2011, which ranked the second-worst in the funds history.

7 Private Equity Attracts Range of Investors Zuckerman, Gregory; Corkery, Michael. Wall Street Journal (Online) [New York, N.Y] 12 Jan 2012: n/a. 8 http://www.investmentinternational.com/news/property/kuwait-sovereign-wealth-fund-to-invest-in-real-estate-4482.html 9 Unless cited otherwise, facts and figures for GPF are sourced from GPF’s Annual Report 2010, GPF’s Q3 2011 Update, NBIM’s website and Fernandez and Eschweiler, “SWFs”.

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Figure 5: Returns and Asset Allocation

Year Equity Return

Bench- mark Premium Sectors Return

2010 Share 2010

2005 22.49 20.33 2.16 Basic Materials 25.2 9.1

2006 17.04 17.13 -0.09 Industrials 22.2 13.7 2007 6.82 5.67 1.15 Consumer

goods 20.4 11.7

2008 -40.71 -39.55 -1.15 Consumer services 18.1 8.5

2009 34.27 32.41 1.86 Technology 12.5 8.1 2010 13.34 12.61 0.73 Telecom 10.4 4.5

Oil & Gas 9.1 10.8 Healthcare 6.1 7.7 Financials 4 21.4 Utilities -2.2 4.7

Returns on these sectors varied widely in 2010 and especially financial holdings performed poorly. The performance of equity investments is measured against a benchmark, the FTSE Equity Index. NBIM employs an active management strategy with the goal to outperform this benchmark return. Figure 5 also shows the development of equity returns against the benchmark from 2005-2010. Most recently, NBIM reported a tough Q3 2011, which ranked the second-worst in the funds history.


NBIM pursues sustainability objectives both through selective asset allocation and active stakeholder engagement as an investor. In terms of asset allocation, NBIM tenders mandates for specific sectors and geographies, under which designated internal and external managers make independent investment decisions. In 2009 NBIM began to award investment mandates with a particular focus on sustainable business. In detail, GPF-Global funds now flow into three additional sectors, namely renewable energy generation and equipment, water management and mitigation technology. The number of these sustainability-related mandates increased to nine at the end of 2010, up from four a year earlier, and NBIM is tendering further mandates on its website. Assets under management for these categories rose from 7.3 billion kroner in 2009 to 25.7 billion kroner at the end of 2010. About 60% of these assets were managed internally. The second line of action takes the form of active ownership, including motions at annual meetings and open consultations. A notable priority of NBIM has been water management. The fund managers for example recently hosted a seminar at World Water Week in Stockholm to influence companies towards reporting on risks associated with water scarcity and water pollution. NBIM reasons that limited access to clean water is a growing risk for many companies and thus by extension also for their investors.


GPF-Global mainly invests in listed equities from OECD countries with relatively benign risk profiles. In 2011, about 50% of the fund’s equity investments were located in Europe, 35% in the Americas, Africa and the Middle East and 15% in Asia and Oceania. Yet NBIM is said to look for a greater diversification of funds to increase returns and reduce its footprint in underperforming European markets. Returns for the geographies in fact

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differ greatly and in the difficult Q3, equity investments in the Americans, Africa and Middle East (-13.4%) and Asia and Oceania (-12.4%) fared better than European assets (-20.7%).


The Ministry of Finance selects the asset classes and regions that NBIM can invest in. Traditionally, this has included fixed income investments and equity investments of publically listed companies. More recently, however, the fund is exploring real estate as an additional asset class. NBIM has been assigned to invest up to 5% of GPF-Global funds into real estate over the coming years. The fact that these investments are to replace fixed-income shares indicates a willingness to accept more risk in the investment portfolio. Currently, however, GPF-Global is still in a start-up phase in real estate investment. Last year the fund bought a 50% stake in seven properties in and around Paris for close to $1 billion, following its first real estate investment into The Crown Estate’s Regent Street portfolio in London. Investments will primarily be in well-developed markets and traditional property types, such as offices and retail premises. When asked about infrastructure investments, NBIM’s CEO and CIO, Yngve Slyngstad, displayed a rather cautious attitude: “The challenges operationally and with regards to political risk in infrastructure investment is a particular challenge for this fund and also because of our size it is difficult to get a significant allocation but it is something that will be considered over time but there are no immediate plans.”10 NBIM does not consider awarding investment mandates for non-listed equity, private equity, non-listed real estate, Socially Responsible Investment funds or fund of funds.


NBIM has significantly internal management capabilities. In terms of fund under management, external mandates make up only 9.2% of the fund’s total market value (13.7% of equity investments). Nevertheless, more than 60 external managers invest on behalf of GPF-Global but are mainly mandates for markets where it is impractical or unrealistic to build internal expertise.

China $440 billion

China Investment Corporation (CIC) The China Investment Corporation (CIC) is moderately flexible in its investment decisions. While not having a dedicated sustainability policy, the fund has invested in sustainable assets such as renewable energy. Incorporated in 2007 to manage China’s foreign exchange reserve more efficiently, CIC’s asset under management have experienced extraordinary growth, from only $200 billion at its inception to $440 billion. It is likely to receive another a few rounds of asset injections by China’s State Administration for Foreign Exchange (SAFE), People’s Bank of China and Ministry of Finance, given the facts that 1) China’s foreign exchange reserve is going to increase over the next year; 2) CIC has a higher return than other traditional managers of China’s foreign reserves.

10 Interview with FT 13 June 2011

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CIC has a mandate that allows it to invest only in overseas markets, which also includes Chinese companies listed abroad. 11 Like KIC, CIC also suffered heavy losses from its investments in Morgan Stanly and Blackstone group during the previous global financial crisis. Ever since the crisis, CIC has re-adjusted its investment strategy and asset allocation. Though financial services still top CIC’s investment portfolio, it is increasingly allocating more resources to other sectors such as energy and natural resources.

Equity Investments and Risk- Equity Figure 6 CIC’s Asset Exposure

CIC has two arms, one is open market operation (investing in public equities, bonds and other financial instruments) and another is direct investment (usually taking stakes via private placements). CIC was born by issuing special bonds and purchasing US dollars with bond proceeds from SAFE. Therefore CIC needs to make certain levels of return to just pay its debt: according to Lou Jiwei, CEO of CIC, CIC needs to make 300 million RMB just to service its debt interest. Therefore, CIC has to invest in safe assets, such as US Treasury bills to earn a low but certain return to pay debt interest. CIC is also under pressure from the government to generate a decent return on its massive assets under management. Thus, CIC adopted a mixed strategy, allocating some amount to bonds and equities, with the rest investing in higher risk assets. (See figure 6)


CIC has not made any public announcements about its commitment to sustainability; its main driver for investment is based on financial returns. In January 2009, it announced investments in GCL-Poly Energy Holdings, a solar power PV manufacturing.


After heavy losses from financial service firms and amidst a protracted European debt crisis, CIC has gradually shifted its concentration from developed markets into emerging economies and from North American markets to Asian markets. (See figure 7)

11 Including companies listed in Hong Kong Stock Exchange

4%

48% 27%

21%

Asset Exposure

Cash Funds and others

Equities

Fixed Income Securities

Alternative Investments

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Figure 7: CIC is moving from developed economies to emerging markets

Equity Investment by Region 2009 2010 North America 43.90% 41.90% Asia Pacific 28.40% 29.80% Europe 20.50% 21.70% Latin America 6.30% 5.40% Africa 0.90% 1.20%


With such large amount of assets, CIC is outsourcing a large proportion of its open market operation to outside fund managers but retain absolute control over its direct investments. CIC’s open market operation investment decision is based on financial returns; it can invest in virtually any publicly traded financial instruments. In the meantime, CIC has showed great interest in investing in infrastructures, such as utilities, toll roads and railways. In January 2012, CIC announced to invest in UK Thames Water. This investment echoes CIC’s stated notion, which is to seek long term investments with stable returns. In that sense, any investments that meet the aforementioned CIC criteria, would be attractive to CIC.


Since its inception, CIC has been building its internal management capacities. Today it is managing 41% of assets internally. Over the past 4 years, CIC has recruited a lot of professional managers with previous leading financial institutions working experience. It is likely that CIC will continue to improve its internal management capacity but will still outsources a large amount to outside fund managers.

Korea $45 billion

Korea Investment Corporation (KIC) The Korea Investment Corporation invests in a variety of asset classes, but is still a somewhat conservative investor. It yet has to see exposure to sustainability-related assets. The KIC investment strategy is to increase the long-term purchasing power of Korea’s sovereign wealth by generating consistent and sustainable returns based on appropriate risk allocation.12 With its relative small size of assets under management, KIA highly concentrates in traditional public markets (90.8%), with very little exposure to alternative asset class (5.5%). During financial crisis, a host of Wall Street investment banks had lined up to KIA for much needed capital. KIA responded by investing in a few investment banks including Merrill Lynch, which later incurred substantial losses.13

Equity After substantial loss from its previous investments in major Wall Street

12 KIA Annual Report 2010 13 The loss is estimated around US$1,3 bn.

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Investments and Risk-Return Profile

investment banks, KIC has re-adjusted its risk tolerance and appetite and adopted a more moderate investment strategy. KIC introduced different benchmark into its asset class, such as Morgan Stanley Capital International All Country (MSCI) as a benchmark for its equity investment.(See figure 8)

Figure 8


KIC does not have a publicly communicated sustainability policy. It has no investments in infrastructure-related projects or funds.

Emerging Markets and Geographic Profile Figure 9

KIC allocates more than 90% of its portfolio in oversea markets. KIC has been primarily focusing on developed economies both prior to the financial crisis and in its aftermath. While currently only 11% of its portfolio is invested in emerging markets, KIC’s management, has showed interest in allocating a higher share to emerging markets in the future. (See figure 9)


KIC only allocates 5% of its portfolio into alternative asset classes and more than 90% are in public markets, either in equities or bonds. In response to the underperforming equity and bond markets, KIC has set up a private equity arm to channel some of its portfolio into assets with higher yields. It is likely that KIC will devote more resources into the PE fund amidst dooming global economy and continued European debt battle.

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Surprisingly, KIC manages 71% of its portfolio internally with only 85 employees.14 KIC is unlikely to outsource its investments to outside fund managers but will seek partnership with other SWF, such as China Investment Corporation (CIC) to enhance mutual understanding and co-invest in politically sensitive projects such as energy projects in the US.

Qatar $85 billion

Qatar Investment Authority (QIA) The Qatar Investment Authority (QIA) is a flexible investor with diverse assets. It has supported sustainable investments in the past but its actual activity remains somewhat unclear. Created in 2005, the QIA has $85 billion in assets under management. As growing revenues from LNG exports are flowing into Qatar, this SWF will undoubtedly further gain in size and importance. QIA mainly follows a mission to diversify the economy away from hydrocarbons, both inside Qatar and internationally. The organization is fairly discrete about investment strategy and asset allocation.


QIA describes itself as taking as a global long-term investor with a flexible but conservative approach.15 In its equity investments the fund has chiefly focused on blue-chip companies such as Volkswagen, Sainsbury, Credit Suisse or the Qatari rail network.


In 2011 QIA purchased a 6.2% interest in the Spanish utility Iberdrola, which is a leading player in renewable energy. Interestingly, QIA’s engagement seems to transcend mere financial interests. As part of the deal it was agreed that Iberdrola establish its Middle Eastern regional headquarters in Qatar, and that companies and QIA will pool their resources to pursue new business opportunities in emerging markets. This could provide an angle for QIA to directly invest into renewable energy ventures. In 2008, QIA also announced to contribute the lion share of a $400 million clean technology investment fund in cooperation with the UK’s Carbon Trust. The idea was to finance clean energy through venture capital investments primarily in the UK. Yet there has been no update on the progress or the implementation of this fund since. It is also worth pointing out the broader sustainability efforts of Qatar. Following its winning bid to host the FIFA World Cup 2022, Qatar aims to showcase its sustainable intentions. Qatar for example launched the Environment and Energy Research Institute in 2011, with a priority focus on mitigating climate change. Should Qatar prioritize sustainable infrastructure this will most likely leave marks on QIA.

Emerging Markets and Geographic

In terms of currency, QIA targets a portfolio allocation of 40% of assets denominated in USD, 40% in EUR and 20% in other OECD currency. Generally its overseas investments tend to focus more on Europe and

14 Excluding executive management 15 Unless cited otherwise, facts and figures for QIA are sourced from QIA’s website and Fernandez and Eschweiler, “SWFs”.

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Profile

Asia, with a few investments in the US (especially real estate). Like its Gulf peers from ADIA and KIA, QIA is expected to have invested significantly in India. It maintains offices in India and China. The fund also has been seen to practice a type of financial diplomacy. In Indonesia, QIA in 2010 discussed to set up a $1 billion dedicated fund in a joint venture with the Indonesian government. It eventually went ahead as the sole investor and is expected to make investments in natural resources and infrastructure, together with selected industrial and financial projects. In Morocco, QIA established an equal-share joint venture worth $2 billion that aims to help the country fund major development projects.


It is believed that QIA’s assets comprise public equities, private equities, real estate and alternative investments. As a relatively young outfit, QIA initially focused on large public equities. With the increase in staff capacity and investment expertise, the fund is expected to slowly move into investments in smaller companies and private equity deals. QIA for example recently invested $700 million in a real estate project in Washington DC.


QIA channels many investments through its subsidiaries Qatar Holding (in equities) and Qatari Diar Real Estate Investment Company (real estate). Its internal management capabilities and staff numbers are expected to rise with the size of the fund.

Abu Dhabi $627 billion

Abu Dhabi Investment Authority (ADIA) The Abu Dhabi Investment Authority (ADIA) undertakes diverse investments into several asset classes, but has not yet shown a specific preference for sustainable investments. ADIA is widely thought to be the largest SWF in the world, with SWFI estimating the funds size at $627 billion under management. Created in 1976, ADIA follows the general mission to secure and sustain the future wealth of Abu Dhabi by generating long-term, sustainable returns. The fund is increasingly becoming more transparent and has begun to release annual reporting documents in 2011.


ADIA accepts a comparatively high level of risk in its portfolio, including between 46-70% in equity investments (ADIA states only the permissible range of investments). 16 For its internal equity management, the fund relies on a benchmark, the MSCI global equity index. Fund managers recently commented that they expect the benchmark to move between 6-8% over the long-term. Actual returns on investments are only posted as 30-year data, although annualized figures suggest an overall return on all investments of 8.1% return for 2010 and 8% for 2009. Others have previously also quoted insiders with higher figures from 10-20%.17

16 Unless cited otherwise, facts and figures for ADIA are sourced from ADIA’s Annual Review 2010, ADIA’s Annual Review 2009, ADIA’s website and Fernandez and Eschweiler, “SWFs”. 17 http://www.nytimes.com/2008/02/28/business/worldbusiness/28fund.html

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For this report no dedicated sustainability policy could be identified from publicly available information. Yet ADIA has showed a preference for sustainability close to home, namely in the design of its new head offices. To be completed in 2012, ADIA’s new twin towers are reported to utilize state-of-the-art sustainable design techniques and be labeled eco-friendly.


ADIA only invests abroad and usually outside the Gulf region, including significant equity investment in emerging markets. According to its statements, geographic ranges for total asset allocation stipulate a 35-50% window for North America, 25-35% for Europe, 10-20% for developed Asia and 15-25% for emerging markets. In terms of equity investments, management further reveals that its total portfolio includes 35-45% in developed markets equities and 10-20% in emerging markets equities.


While ADIA only releases target ranges, rather than its actual investment allocation, the relative diversity of its investment portfolio is clearly visible in Figure 10 below. This is also mirrored in ADIA’s internal organization, which includes several departments for alternative assets, private equity, infrastructure and real estate. In the terminology of the fund, alternative assets denote chiefly hedge funds, commodities and managed futures. These assets are mostly under external management.

Figure 10

Portfolio Asset Allocation Min Max

Developed Equities 35.00% 45.00% EM Equities 10.00% 20.00% Small Cap Equities 1.00% 5.00% Government Bonds 10.00% 20.00% Credit 5.00% 10.00% Alternative 5.00% 10.00% Real Estate 5.00% 10.00% Private Equity 2.00% 8.00% Infrastructure 1.00% 5.00% Cash 0.00% 10.00%

Private equity makes up between 2-8% of investments, thus translating into a figure between $12.5 billion and $50 billion. Reuters has quoted sources close to the fund as saying that ADIA is now ramping up its private equity activities after relatively slow activity during the financial crisis. Management chiefly invests in private equity through primary and secondary private equity funds, but also considers co-investing directly alongside partners in selected cases. Further, the PE department is thought to gradually broaden its geographic exposure to include investments in developing private equity markets, such as in Asia, Latin America and Africa.18 In terms of infrastructure, Reuters in 2011 further quoted sources that

18 http://www.euromoney.com/Article/2914040/Sovereign-wealth-funds-Adia-unveils-key-developments.html

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ADIA is looking to “significantly boost its investments [in infrastructure] as it is not satisfied with its current exposure”.19 Started in 2007, ADIA’s infrastructure department looks for market-leading positions and relatively stable cash flows, including utilities, such as water, gas and electricity distribution and transmission companies, as well as transport infrastructure. Rather than seeking a controlling stake, it seeks to acquire minority equity stakes alongside proven partners. ADIA emphasizes a focus on developed markets but considers investments in emerging markets on an opportunistic basis. ADIA’s recent investment into a 10% stake in Thames Water epitomizes most aspects of this strategy.


ADIA makes significant use of external managers, with 80% of assets under external mandates, including more than 60 equity mandates for particular investment strategies. Within its active management capabilities, the fund has placed a special focus on equity investments in Latin America and India, as suggested by its organizational set-up.

Australia $73 billion

Australia Government Future Fund (Future Fund) The Australian Government Future Fund is still fine-tuning its investment strategy but looks to embrace a wide variety of asset classes. It is held at least in part accountable for the sustainability of its investments and has shown interest in natural resource assets. The Future Fund is an independently managed investment fund into which the Australian Government deposits its budget surplus. The Future Fund was established by the Future Fund Act 2006. The purpose of the fund is to meet the government’s future liabilities for the payment of superannuation to retired public employees. The Future Fund Act stipulates that funds cannot be withdrawn from the fund until 2020, unless the fund exceeds a target asset level. Investment of the Future Fund is the responsibility of the Future Fund Board of Guardians with the support of the Future Fund Management Agency. The Board and Agency also invest the assets of the Building Australia Fund ($4.69 billion), the Education Investment Fund ($7.61 billion) and the Health and Hospitals Fund ($4.01 billion), which were established by the Nation-building Funds Act 2008.


The Future Fund has allocated a comparatively large share into high-yield assets such as equities, real estate or alternative assets. The Board has adopted an average return of at least the CPI plus 4.5% to 5.5% as the benchmark for its return over the long run. However, during the transition period, the Board is prepared to accept a return below the aforementioned target. Noticeably, the Board mandates that the fund cannot take more than a 20% stake at a listed foreign company. (See Figure 11)

19 http://english.alarabiya.net/articles/2011/09/13/166726.html

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Figure 11

Year Return Bench- Mark(CPI) Premium Sectors Share

2010 05-06 6% 4.0% 2% Financial 24% 06-07 6.2% 2.1% 4.1% Materials 16% 07-08 1.5% 4.5% -3% Energy 11% 08-09 -4.2% 1.5% -5.7% Cons Staples 9% 09-10 10.6% 3.1% 7.5% Industrials 9% 10-11 12.8% 3.6% 9.2% Information 8%

Since inception

5.2% 3.0% 2.2% Cons Discretionary 8%

Healthcare 7% Telecom 5% Utilities 3%

Like other SWFs, financial equities (24%) top the Future Fund’s sector exposure, followed by Materials (16%).


The Environment Protection and Biodiversity Conservation Act of 1999 requires the fund to report on how its activities accord with ecologically sustainable development and on its environmental performance.


In June 2011, the fund had invested more than 40% of its asset into Australian equities and 5% into emerging markets – up from only 3.1% in 2010. Another noticeable change in its asset allocation is the increased exposure to alternative assets (from 15.6% in 2010 to 18.4% in 2011). The fund further sets the goal of allocating 20% of its assets into alternatives by June 2012. The Board stated in their annual report: “We continue to believe that on a medium to long-term view, we should increase our exposure to emerging markets to benefit from the secular development of many of these countries.”20( Figure 12)

Figure 12

20 Australia Government Future Fund 2011 Annual Report

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The Board of the fund decides which asset classes the Future Fund can invest in. The Board believes that “a flexible approach to asset allocation exposure is appropriate and expected return per unit risk can be obtained from a broadly diversified allocation across asset classes”.21 The Future Fund is still in transition and fine-tuning its investment strategies. The Board believes that its focus should be on the effective management of beta (market related risk) because it is a stronger driver of long term returns than alpha (skills related risk).22 The Future Fund has been actively exploring opportunities to be involved in infrastructure investments. In terms of its investment strategies, the Future Fund invested in pooled funds with managers that it believes can access attractive opportunities. In addition to pooled funds, the Future Fund also seeks to acquire direct exposure to quality assets, both in Australia and the rest of world. For example, it acquired a 17.2% interest in Gatwick Airport in 2011. 23


The Board and management concentrate on building competence in how to allocate risk across investment markets to generate the desired returns. In terms of specific investments, the Future Fund usually outsources to external managers. Yet direct engagements such as the Gatwick acquisitions make the Future Fund’s exact policy on internal and external fund management hard to pin down.

Singapore $157 billion

Temasek Holdings Temasek is a very flexible investor but strongly concentrates on Singapore and China. While not following an independent sustainability policy, the fund has made a series of pertinent investments. Incorporated in 1974 and wholly owned by Ministry of Finance, Temasek is the smaller of Singapore’s two SWFs. It is renowned for its transparency. The fund views itself slightly different from its peers, as expressed by Temasek Holdings' executive director Simon Israel: "The word 'sovereign wealth fund' by nature almost implies fund manager. We are not a fund manager. As a private company we own our assets. That's a key point of differentiation. So we act (on) our own, not as managers.”24


Since 2002, Temasek has realized 21% annualized returns on investments. The fund is seeking a risk-adjusted return. According to the annual Value-at-Risk notifications, VaR decreased from 14% in 2010 to 12% in 2011.

Sustainability Policy and

In July 2010, Temasek reached an agreement with Impulsora Mexicana de Desarrollos Inmobiliarios (IMDI) to establish a joint venture to pursue

21 Ibid 22State of Investment Policies, Australia Government Future Fund, Feb 2012 23 Australia Government Future Fund 2011 Annual Report 24 Interviewed by Channel News Asia 2008

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Investments land banking opportunities in Mexico. IMDI states that it is focussing on technologies and design concepts that ensure a high level of conservation of land, flora and water resources, embracing sustainable environment. 25


Temasek’s primary focus is in Asia, with 77% of its underlying portfolio exposure. Within the Asian exposure, 32% of the portfolio is allocated in Singapore. China remained its largest investment destination. Over the last decade, in response to growing opportunities in Asia, Temasek has been gradually shifting its emphasis toward Asia. In 2003, 16% of its portfolio was invested in emerging Asia excluding Japan and Singapore, while a third was invested in OECD countries. In 2010, 46% was invested in Asia outside Singapore and Japan, and only 22% in OECD and other economies.(See figure 13)


Temasek allocates more than one third of its capital into financial services, followed by transportation and industrials. At present, the top three sectors in Temasek’s portfolio accounts for approximately 81%, however, Temasek has declared that it wants to diversify its asset allocation beyond its current portfolio and derail from its heavy focus in financial services.(See figure 14) According to Temasek’s press release, two new companies have been established under Temasek’s ownership—SeaTown and SingBridge. While Temasek will still predominately invest in public equities, SeaTown will be more diversified in terms of asset classes and geographic exposure. SingBridge, established in 2009, has been developing sustainable infrastructures across regions in Asia. For example, Temasek develops sustainable cities such as Tianjian Eco-City and Guangdong Knowledge City in China.

Figure 14

Like its GIC counterpart, Temasek has a keen interest in infrastructure. But unlike GIC, Temasek does not have a distinct asset class that is specific to infrastructure. Speaking at the World Bank-Singapore Infrastructure Finance Summit in 2010, Wong Kim Yin, head of infrastructure and transportation group at Temasek, said: “sovereign wealth funds can be very active, if you can find a suitable framework for tapping them, the future of infrastructure financing can be very bright.”

25 Temasek press release, July 21, 2010

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In September 2010, Temasek acquired US$57.6 million of convertible bonds issued by the Vietnamese company HAGL Group. The bonds would be used to build hydropower plants and other projects. In addition to Vietnamese investment, Temasek also invested up to $200 million in GMR Energy, an Indian power generation, transmission and distribution company. Followed the investment, Manish Kejriwai, head of Temasek Holdings India said in a statement, “The energy sector within the infrastructure space is an attractive long-term investment area. India may have historically lagged behind in adding new generation capacity, we believe that enabling regulations and private sector participation will allow the sector to add substantially to India’s GDP growth rate.”


Temasek has not clearly drawn the line in terms of the proportion of investments is done by external fund managers. Temasek does share some similarities with other SWFs when comes to deal execution, it places investments via subsidiaries wholly or partially owned by Temasek.

Singapore $248 billion

Government of Singapore Investment Corporation (GIC) GIC’s mission is to preserve and enhance the international purchasing power of the reserves placed under its management by the Government. The aim is to achieve good long-term returns above global inflation over the investment time horizon of 20 years.26 Incorporated in 1981 and chaired by the current Premier Minister, GIC is more visible and larger than its cousin Temasek. GIC has taken different investment approaches from Temasek, which dates back to the sources of two SWFs. GIC was established to manage Singapore’s foreign reserve while Temasek was created with assets transferred from Singaporean Government.


GIC was hit severely during the previous global financial crisis, with more than 70% loss from its investment in UBS. GIC management has been widely criticized by taking risk investment strategies. Ever since the loss, GIC has been moving from then highly concentrated sector-finance to other more diversified sectors. 27 (See figure 15)

Figure 15

26 GIC annual report 2011 27 For example, GIC decreased its exposure to public equities from 51% in 2010 to 49% in 2011.

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GIC does not have a dedicated sustainability policy. Yet it has been investing heavily in sustainable projects and infrastructures, driven mainly by a motivation to seek higher potential returns from that sector. According to a Reuter’s report, GIC and the International Finance Corporation’s (IFC) wholly-owned subsidiary Asset Management Company (AMC)28 are exploring the installation of a global infrastructure fund.29 The size of the fun is estimated around $1 billion. The fund will invest in infrastructure in emerging economies in Asia. Another case in point was GIC’s investment in a power company: in 2011, GIC partnered with GE and invested in five Georgia natural gas-fired power plants that together make up the largest fully independent power producer in the southeastern United States.


Unlike Temasek, GIC’s primary regional concentration is in Americas, which accounts for 42% of its portfolio in 2011. Since the financial crisis, GIC has shifted its attention from developed economies to emerging countries. With the ongoing European debt crisis and US slow recovery, GIC investment is believed to continue its geographic adjustments with emerging Asian economies accounting for a large proportion of its portfolio. (See figure 16)


GIC is a multifaceted fund with different lines of business. It has played a role of fund of funds, investing in other funds, whereas it has also directly invested in companies through public equities or private placements.


If there is one thing differentiating GIC from other SWFs, it is probably the number of people GIC employs, which is more than 1000. Such a large in-house personnel enables GIC to run the majority of investment by itself with outsourcing a small amount of investments. In fact, GIC has different groups specializing in different business and sectors. For example, it has infrastructure group that deals with GIC’s investment in infrastructure, including the aforementioned joint investment fund with IFC’s asset management company.

Conclusion The report has shown that SWFs are not a homogenous investor group, but in fact differ widely in their missions, structures and investment strategies. Using criteria for investment flexibility and appraisal capability,

28 Established up in 2009, the AMC has about US$4.1 billion in assets under management as of June 30, 2011. It has three funds - the IFC Africa, Latin America and Caribbean Fund, the Bank Capitalization Fund, and the Africa Bank Capitalization Fund. 29 Reuter news report on Feb 8 2012

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an initial screening compared 25 SWFs according to their potential fit as an investor into sustainable infrastructure. It was suggested that a higher tolerance for elevated risk-return profiles is especially relevant, a proxy for which is the portfolio share of equities and alternative assets such as private equity and infrastructure. Emerging market exposure, management capabilities and transparency are also of relevance in identifying potential partners. A more thorough investigation of the ten highest-ranking SWFs yielded profiles of quite differentiated investment strategies. For the purposes of engaging SWFs as possible investors into sustainable infrastructure, the report identified four types of funds: Entrepreneurial SWFs such as Mubadala have high investment flexibility and actively invest in sustainable assets. These funds may be actively interested in seeking out forms of cooperation. Committed funds have strong sustainability policies but are restricted by their investment mandates and risk-return profiles. These funds may be very interested in partnering, provided that suggested forms of cooperation make sense under their constrained investment flexibility. Opportunistic SWFs have high investment flexibility but do not follow a comprehensive sustainability strategy – these funds may consider investments on an opportunistic basis, especially if concrete opportunities are properly developed and communicated. Observing funds are still not entirely prepared to consider sustainable investments but show potential and may be interested in dialogue.

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swfs and sustainable infrastructure

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