Kuwait prepares to reject oil-reliant economy

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

Report informs, citing Bloomberg, that 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 neighbours the UAE 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 $700bn 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 per cent ESG compliance for the entire portfolio while currently focusing on the E part of ESG,” Ghanem Al-Ghunaiman told Bloomberg News in an emailed reply to questions, offering a rare glimpse inside the fund.

The authority has applied the ESG standard set by an independent globally-recognised 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.

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

Experts believe that in 2025, the overall volume of the ESG market will reach $50 trillion, with the interest of institutional investors including sovereign funds to play a key role.