In a recent analysis, the Economist Intelligence Unit (EIU) dealt with what the Managing Director of the Kuwait Investment Authority, Ghanem Al-Ghunaiman, stated that 100% of its investments are in compliance with environmental, social and governance standards. The analysis suggested that the KIA will move forward towards sustainable financing and gradually abandon its interests in oil and gas, reports Al-Rai daily.
However, “its lack of transparency will hinder external scrutiny in its progress, which will also harm its credibility with regard to standards of governance,” said sources. The EIU added that the Kuwait Investment Authority’s pledge to increase its commitment to combating climate change follows a broader trend in the Gulf Cooperation Council, where governments have set stricter climate goals and net zero “carbon” targets. But unlike its Gulf peers, Kuwait has not set a date for reaching carbon neutrality, even though climate change has become a pressing issue in the country (Kuwait recorded the world’s highest temperature for 2021, at 53°C, endangering living conditions).
According to the government’s own estimates, a 0.5-2 sea level rise would sink up to 3 percent of Kuwait’s land area, potentially reducing GDP by 5 percent. Al-Ghunaiman, who was appointed as managing director of the KIA in August 2021, emphasized the environmental aspect, social and corporate governance standards. Although the authority’s reserves are mainly derived from oil revenues, it set out to drive sustainability during the period when Farouk Bastaki was managing director.
In 2017, KIA was one of the six founding members of the One Planet Sovereign Wealth Fund initiative, which seeks to invest in a sustainable way. The KIA has also pledged to make investments in the Green Saudi Initiative. Thus, the recent commitment to focus on climate change in its push for 100 percent compliance with environmental, social and government standards is in line with the KIA’s strategy to reduce carbon emissions.
However, critics have accused the sovereign wealth fund of “greenwashing” because it currently sits on large stakes in oil and gas companies such as the Kuwait Petroleum Corporation and the SUMED pipeline. Moreover, the KIA has not made any significant investment in the renewable energy sector. According to the Economist Intelligence, the KIA claims that two-thirds of its current portfolio is ESG compliant, although the allegations cannot be verified, as investment vehicles have not disclosed their assets nor the ESG metrics they use.
In its view, the ambiguity surrounding the KIA is hampering the evaluation of its efforts to become fully compliant with ESG standards. Regarding this ambiguity, Al-Ghuneiman’s statement made no mention of when the agency aims to achieve ESG objectives. The Economist believes that without greater transparency, the credibility of the KIA as a champion of high standards of governance is likely to remain in question.
However, the Kuwait Fund’s lack of transparency is no different from its regional peers, who all remain very cautious about sharing financial information.