Report from IADB finds ESG investments important for sovereign wealth funds and pension funds

Jul 07, 2020

A report by the leading source of development financing for Latin America and the Caribbean, the Inter-Amercian Development Bank (IADB) pointed to an increase in investors’ interest in investments that consider environmental, social, and governance factors (ESG investments) as investors seek investments that combine financial returns with societal benefits. 

The report, entitled The Business Case for ESG Investing for Pension and Sovereign Wealth Funds was published in June 2020 and uses Chile’s sovereign wealth funds and pension funds as a case study. It provides evidence indicating that ESG investments can deliver better environmental, social, and governance performance without sacrificing financial returns. Given their large share of global assets and long-term investment horizon, as well as governments’ concerns for societal outcomes, ESG investments are particularly important for sovereign wealth funds and pension funds. 

 The report also points to a lack of standardisation in ESG data reporting by companies, which makes it difficult for investors to compare performances across companies or even between different years, and called for more work to be done on creating standardised, easy-to-understand ESG reporting methods, as well as more research into sustainable investing.