The Public Investment Fund is a Saudi sovereign wealth fund and one of the largest in the world, it was established in 1971. The main objective of the fund is to provide investment funds for the Saudi government to generate capital and invest it in local businesses and the economy, acting as a catalyst for driving positive change and sustainability within the country. The public Investment Fund has created nearly 500,000 jobs in the last five decades and currently has $500 billion in net assets. While the projects the Public Investment Fund invests in, such as the Neom Project and Red Sea Project, are extremely economical and sustainable, the top 10 holdings of the fund, which include companies like Uber and Lucid Group Inc, cannot be classified as sustainable and do not align with the goals and objectives of the fund. Therefore, I have awarded the fund 1 planet.
The Public Investment fund was created in the 1970s. It currently has a total of $500 billion net assets and has led to the creation of 47 Saudi companies and nearly half a million jobs in order to help diversify the Saudi economy. The fund invests in both the public and private sector, with the majority of its investments going towards helping Saudi achieve its Vision 2030 goals. Some of these investments include Saudi equity holdings, Saudi infrastructure development and real estate, Saudi sector development and giga-projects, as well as international strategic investments. Some of the top ten holdings include companies such as Uber, Electronic Arts, and Lucid Group Inc. The average ESG score of the top 10 holdings is 21.5. This makes the Public Investment Fund a medium risk level stock. However, the top holding, which accounts for 60% of the fund’s holdings, is a high risk investment with an ESG score of 30.87. I believe that although it is great that the fund is investing in sustainable projects, their ESG score does not align with or reflect the goals of their fund, which is to support sustainable development and returns. I would expect a fund that claims it is committed to sustainable development would have a low risk ESG score and that the top ten holdings would include more sustainable companies, unlike Uber and Lucid Group Inc., which have a long track record of mistreating their workers and causing environmental harm and degradation.
The Public Investment Fund claims to have created a “governance and operating model that reflects its mandate and objectives, and builds on global best practices. The operating model ensures transparency, efficient decision-making, and the ability to evolve”. They also state that the fund uses clear, methodological, and professional processes when choosing what sectors to invest in and carefully considers the investment aims of each of its portfolios, as well as offer the necessary details such as the criteria for permissible assets, assigned targets, key performance indicators, and risk tolerance. Although their website emphasized the Public Investment Fund expects “all vendors working with PIF (now or in the future) demonstrate their commitment to meet the highest standards in quality, ethics and sustainability”, there was no indication of any sustainability criteria that needs to be met for current and future vendors. This is concerning especially when considering how this allows for environmental travesties to creep into the mix. While the overall objectives of the fund criteria sound good, it seems like greenwashing due to the lack of detail and enforcement. One way the Public Investment Fund could improve in this aspect would be to transparently display their SRI criteria on their website and make the criteria clear and detailed to ensure unsustainable companies do not creep their way into the fund.
The Public Investment Fund is overseen by HRH Mohammed Bin Salman and a board of directors who are responsible for reviewing strategic and operational activities and overseeing five committees. However, the portfolio manager has been Yazeed Alrashed since July of 2018. Alrashed has a bachelor and masters degree in computer science, as well as work experience in the field of finance. The board members also have degrees in similar fields including economics, finance, and business. However, none of the portfolio managers seem to have the necessary background, expertise, or experience in sustainability or environmentalism in order to successfully manage a fund targeted to achieve sustainable development. Furthermore, no one has been assigned a position of ESG analyst or any form of sustainability officer in order to manage the sustainability of the fund. I strongly believe that in order to be a successful, sustainable fund, more ESG, sustainability, and environmental professionals need to join the team to ensure that the fund meets its financial and developmental goals while simultaneously protecting and enriching the planet.