KUWAIT Investment Authority (KIA) wants to make its entire portfolio compliant with environmental, social and governance (ESG) standards, its managing director said, as Gulf nations reliant on crude move toward life after oil.

Kuwait has built up its riches thanks to vast crude exports — something which puts the engine of its economy at odds with ESG principles.

Unlike regional neighbors the United Arab Emirates and Saudi Arabia, Kuwait hasn’t set a net-zero carbon emissions goal despite recording some of the planet’s hottest temperatures.

Yet the KIA, which manages US$700 billion according to the Sovereign Wealth Fund Institute and has its own governance structure, says ESG has become central to its outlook.

The world’s oldest sovereign fund, and its third-largest, has long sought to guard itself from the nation’s tumultuous politics with a mandate to prepare the OPEC member state for a post-oil future.

“The process is ongoing with the KIA currently transitioning toward 100 percent ESG compliance for the entire portfolio while currently focusing on the E part of ESG,” Ghanem Al-Ghunaiman said, offering a rare glimpse inside the fund.

The authority has applied the ESG standard set by an independent globally-recognized ESG benchmark provider, according to Al-Ghunaiman, who was appointed in August. He didn’t disclose the provider’s name. It has also started issuing ESG quarterly reports for stakeholders.

The KIA’s target includes all asset classes and regions under management, and may include companies “that have recognized and adapted to long-term financial risks and opportunities presented by climate change and resource depletion.”

The KIA rarely comments on its strategy, keeping even the size of its portfolio and its distribution largely under wraps.

In line with the fund’s policy, Al-Ghunaiman did not disclose how many of the KIA’s assets under management are ESG-compliant.

However, a person familiar with the matter, speaking on condition of anonymity to discuss confidential information, said at least two-thirds of the authority’s assets comply.

Globally, sovereign investors are taking environmental, social and governance principles more seriously despite criticism they cling to strategies that fail to acknowledge how rapidly the planet is overheating.

The ESG market is on track to exceed US$50 trillion by 2025, according to Bloomberg Intelligence, as the giants of global finance come up with increasingly inventive ways to apply the acronym.

Critics warn ESG’s soaring popularity has led to widespread greenwashing, whereby claims of sustainability are exaggerated or even false.

(SD-Agencies)