Davos: SWFs Turn More Activist; May Be Key Toward a Clean-Tech Future

While demands SWFs make as shareholders could help improve returns for all parties, they could also reflect politically motivated influence.

(January 29, 2010) —  Reports emerging from the World Economic Forum in Davos suggest that SWFs are expected to turn more active, leaving behind their historically secretive, passive reputations — with some commentators going so far as to suggest that their tremendous size and power could even be a key toward a more clean tech future.

“As they become even bigger and more successful, they feel more comfortable in investing in larger stakes,” said Efraim Chalamish, a SWF expert and global fellow at New York University Law School, according to Reuters. “As they have a bigger share in the pie, we expect them to become more active.”

With the world’s annual funding gap of around $150 billion on projects to cut carbon dioxide emissions, SWFs, in Norway, Saudi Arabia and Kuwait, for example, have become increasingly attracted to investments that benefit future generations. Abu Dhabi’s Future Energy Company has supported environmental investments through its Masdar Clean Tech Fund, and Norway’s Government Pension Fund has championed its effort to remain a role model for socially responsible investment, recently blocking 17 tobacco companies from its fund. Additionally, China’s fund has committed to larger clean energy projects. Some Western politicians worry SWFs may be pursuing a political agenda in their clean-tech investments.

Sovereign wealth funds manage $3 trillion in assets, with around $1.5 trillion in equity investments and ownership of about 4% of the world’s listed companies. Two-thirds of their wealth come from oil and gas interests. In less than 10 years, the Deutsche Bank forecasts their assets will more than double to $7 trillion.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742