With over US$13–14 trillion in assets under management, sovereign wealth funds are stepping up as leading financiers in the global climate agenda. As state-owned vehicles with strategic mandates and multi-decade investment horizons and low liquidity needs, they are uniquely poised to support large-scale mitigation, transition, and resilience projects in both developed and emerging markets. By reallocating hydrocarbons wealth into low-carbon opportunities, they can also support adaptation measures in vulnerable regions and help close critical infrastructure deficits.
Sovereign wealth funds (SWFs) are portfolios funded by commodity revenues, fiscal surpluses, or foreign-exchange reserves and owned by national governments. Today, there are over 100 SWFs managing roughly US$13–14 trillion—surpassing the global private equity industry and ranking alongside the world’s largest pension funds in terms of capital.
Their long-term institutional investors with vast capital structure grants them the ability to anchor projects that require patient capital and significant scale. These characteristics align SWFs perfectly with infrastructure, energy transition, and climate innovation, enabling them to pursue objectives that private investors may deem too slow or too risky for shorter horizons.
These funds often pursue investment mandates linked to national development goals and intergenerational wealth preservation, ensuring that returns benefit citizens today and for decades to come.
Climate risk is now a fundamental factor in SWF decision-making. According to the IFSWF–OPSWF “Facing Headwinds” report, 75% of SWFs explicitly consider climate factors—up from 62% just a year earlier—and most large funds incorporate ESG policies into manager selection, due diligence, and ongoing portfolio monitoring.
Despite a slight dip in overall ESG adoption from 79% to 69% during 2023–24, major European funds lead the way in transparency and disclosure, while newer African and Latin American funds embed climate-aligned investment frameworks driving change in their founding mandates. Initiatives like the One Planet Sovereign Wealth Fund (OPSWF) promote standardized reporting and encourage signatories to align with the Paris Agreement and SDG objectives.
African SWFs like Senegal’s FONSIS and Ghana’s MIIF have embedded climate impact in their founding charters, while numerous funds coordinate with OPSWF to adopt best practices in reporting and portfolio decarbonization.
SWFs are directing growing portions of their capital to themes that directly support the energy transition, build resilience, and foster innovation. These investments span multiple sectors and geographies, often blending public and private funding sources to maximize impact.
In the last two years, SWFs have committed over US$6 billion directly to renewable energy and co-invested alongside private managers in specialized transition funds delivering 12–15% IRRs, outperforming traditional infrastructure by roughly 300 basis points.
Emerging-market funds are increasing allocations to domestic adaptation and resilience programs, financing irrigation projects, drought-resistant agriculture, and coastal defenses to safeguard communities against escalating climate hazards.
The following funds exemplify leadership through ambitious targets, transparent reporting, and innovative structures that channel capital toward Paris Agreement and SDG objectives:
Norway’s Government Pension Fund Global, the world’s largest SWF, has reduced exposure to carbon-intensive sectors and is scaling up its direct allocations to renewable-energy infrastructure in line with its net-zero commitment. The Abu Dhabi Investment Authority leverages oil inflows to invest in grid modernization and battery storage, while the Saudi Public Investment Fund backs green hydrogen hubs and electrified mobility across Vision 2030 projects. Qatar’s fund, having set a mid-century net-zero target, is expanding its green infrastructure holdings and sustainable real assets portfolio.
As sovereign wealth funds deepen their climate commitments, they encounter both promising opportunities and formidable barriers. The closing the annual SDG financing gap remains a compelling invitation for SWFs to allocate more capital toward sustainable development in the Global South, where infrastructure and adaptation needs are most urgent.
Moreover, price volatility in commodities, currency fluctuations, and shifting government priorities can introduce unintended risk. Yet these challenges also underscore why SWFs are uniquely suited to play a leading role: their government backing allows them to absorb short-term shocks in pursuit of transformational climate goals.
By embracing their role as patient, strategic investors, sovereign wealth funds can bridge the gap between private capital’s return expectations and the public sector’s development imperatives. Their ability to partner across borders, engage with multilateral development banks, and co-invest with private managers bolsters the financing ecosystem that is vital for deploying trillions in low-carbon and resilient infrastructure.
Ultimately, the combined action of SWFs can serve as a powerful catalyst for global decarbonization and sustainable growth. As funds align closer with the Paris Agreement and Sustainable Development Goals, they stand to generate not only financial returns but also enduring impact—charting a course toward a net-zero, climate-resilient future for all.
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