Socially conscious investment will expand in 2018

Subject

Sustainable investments outlook.

Significance

Norway's finance ministry is considering whether the country's 1-trillion-dollar sovereign wealth fund should divest some of its shares in oil and gas firms. The rationale is financial. The fund's 36.5-billion-dollar exposure to fossil fuels, along with the government’s stake in Statoil, leaves state revenues vulnerable to a prolonged period of lower oil prices.

Impacts

• More investors will reassess asset allocation after the Norwegian move, especially oil-funded sovereign funds and oil and gas pension plans.
• Fossil-fuel firms are insulated as under 10% of their fundraising is from stock markets but the trend may affect Saudi Aramco’s flotation.
• Financial institutions will ramp up their internal capabilities to assess the ESG risks in their portfolios, particularly in bank lending.
• The rise of machine learning, data science, satellite imagery, equipment-mounted sensors and other advances will enhance ESG risk analysis.