On Finance, Investment and Trade Day, held as part of COP29, the State Oil Fund of the Republic of Azerbaijan (SOFAZ), together with the International Sovereign Funds Forum (SFBF), organized a high-level panel on the topic “The Role of Sovereign Wealth Funds in Financing the Energy Transition.”
This important event, part of the COP29 Presidency and held in the Blue Zone, sought to discuss support for Sovereign Wealth Funds (SSFs) to promote sustainable finance and the transition to a low-carbon economy. The event began with opening speeches by Ithmar Capital Executive Director – Chairman of SFBF Obaid Amraneh and SOFAZ Executive Director – Deputy Chairman of SFBF Israfil Mammadov. The presentations emphasized the important role that the SSF, with its long-term investment strategies, plays in mitigating climate change.
“As wealth funds, we have a responsibility not only for our existing capabilities, but also for creating a capital raising model that will serve sustainable development. Today, our collaboration at COP29 once again reflects our joint commitment to addressing the challenges of the energy transition and climate through long-term and strategic investments,” said Obaid Amran.
“SOFAZ, which makes a significant contribution to the state budget of Azerbaijan, plays an important role in financing the country’s sustainable development program and energy transition. By ensuring strong governance in accordance with the Santiago Principles, a commitment to strengthening economic stability and moving towards a sustainable future is demonstrated,” Israfil Mammadov said .
The event was moderated by Anne Simpson, Head of Global Sustainability at Franklin Templeton. Speakers at the meeting were: Bo Li, Deputy Executive Director of the International Monetary Fund; Guo Xiangjun, executive vice president of China Investment Corporation; Derek Rozicki, head of sustainable investing at investment firm Mubadala; Steve Howard, Deputy Chairman of Sustainability at Temasek; Prasad Gadkari, Executive Director and Head of Strategy, Indian National Infrastructure Investment Fund.
Panelists exchanged views on topics such as integrating transition finance into the investment environment, reducing emissions, asset allocation and managing risk and return expectations. Key regulatory, structural and market challenges arising from the widespread use of transition finance were also discussed, and solutions such as the use of different financial models to expand sustainable investments were highlighted.
Following the discussion, the SFBF released a communique reaffirming SSF members’ commitment to support the decarbonization of their portfolios, strengthen partnerships for sustainable finance, and expand climate finance. The communiqué highlights the importance of creating innovative financial instruments, promoting transparency and a just energy transition, especially in developing countries. The document also notes that the SFBF will continue its efforts to raise capital to combat climate change, with further activities in this regard coming at COP30 in Belem, Brazil, and the upcoming UN climate change conferences.
As part of the COP29 Presidency, the SSF’s unique and strategic role in supporting the goals of the global climate agenda was highlighted. This platform, organized by SOFAZ and SFBF, once again demonstrated the potential of SSF to shape a sustainable future through global cooperation and responsible investment.
It should be noted that on November 11, the 29th session of the Conference of the Parties to the UN Framework Convention on Climate Change (COP29) started in Baku.
The United Nations Framework Convention on Climate Change is an agreement signed at the Earth Summit in Rio de Janeiro in June 1992 to prevent dangerous human interference with the climate system. The abbreviation COP (Conference of Parties) translated from English means “Conference of Parties”, this is the highest legislative body that controls the implementation of the Framework Convention on Climate Change.
There are 198 countries that are parties to the Convention. Unless the parties agree otherwise, the COP is held annually. The first COP event took place in March 1995 in Berlin, and its secretariat is located in Bonn.
How do Sovereign Wealth Funds influence sustainable energy projects?
Interview between Time.news Editor, Anna Petrov, and Energy Transition Expert, Dr. Leonid Grigoryev
Anna Petrov: Welcome, Dr. Grigoryev! Thank you for joining us today. The recent panel at COP29 on the role of Sovereign Wealth Funds (SWFs) in financing the energy transition made quite an impact. Can you share how these funds can contribute to achieving sustainable development goals?
Dr. Leonid Grigoryev: Thank you, Anna! It’s a pleasure to be here. Sovereign Wealth Funds have a unique position within financial ecosystems since they manage significant pools of capital with a long-term investment perspective. Their involvement in financing the energy transition is crucial, as they can allocate resources toward sustainable projects that might not yield immediate returns but are essential for long-term climate goals.
Anna Petrov: Absolutely. During the panel, Obaid Amraneh, the Executive Director of Ithmar Capital, emphasized the responsibility of wealth funds not just to their current capital but also in shaping models for sustainable development. Can you elaborate on what this means in practice?
Dr. Leonid Grigoryev: Indeed, that’s a significant point. Wealth funds are increasingly recognizing that their investment strategies need to align with global sustainability efforts. This means investing in renewable energy projects, green technology, and other initiatives that promote a low-carbon economy. By integrating environmental, social, and governance (ESG) criteria into their investment decisions, they’re not only minimizing risks associated with climate change but also enhancing their potential for stable returns in a transitioning market.
Anna Petrov: The panelists discussed challenges related to integrating transition finance into the investment landscape. What are some of those challenges, and how can SWFs address them?
Dr. Leonid Grigoryev: Some of the key challenges include regulatory hurdles, the need for robust data on the performance of sustainable investments, and the general market’s resistance to shifting away from traditional energy sources. To address these issues, SWFs can advocate for clearer regulations that support sustainable investments and develop innovative financial models that reduce investment risk. Collaboration among global funds, like what we saw at COP29, is essential to share successful strategies and create a unified approach to sustainable finance.
Anna Petrov: It’s clear that dialogue and collaboration are critical. So, what can we expect moving forward in the role of Sovereign Wealth Funds in this energy transition?
Dr. Leonid Grigoryev: I foresee a growing commitment among SWFs to decarbonize their portfolios. The recent communiqué issued by the SFBF after the COP29 discussion indicates a willingness to bolster partnerships for sustainable finance and expand climate investments. This commitment will likely lead to more innovative funding mechanisms for sustainable projects around the globe.
Anna Petrov: That sounds promising. for our readers who might not be familiar, could you briefly explain what the Santiago Principles are and their relevance in this context?
Dr. Leonid Grigoryev: Sure! The Santiago Principles provide a framework for the governance of Sovereign Wealth Funds, focusing on principles of transparency, accountability, and ethics. By adhering to these principles, funds like SOFAZ ensure they are operating responsibly while contributing to sustainable economic growth. In the context of COP29, it underscores the commitment of these funds to govern their investments in a way that supports the long-term health of both the economy and the environment.
Anna Petrov: Thank you for the insights, Dr. Grigoryev. This conversation highlights how intertwined finance and sustainability are in our quest for a greener future. We appreciate your perspective and look forward to future discussions on this vital topic!
Dr. Leonid Grigoryev: Thank you, Anna! I’m excited to see how these initiatives unfold and contribute to the global energy transition.