The Global Public Investor Report 2021 published by OMFIF presented a number of valuable datapoints and insights.
Pension funds lead on ESG, deploying greatest variety of strategies at scale. Compared to pension funds the group of central banks surveyed over the past year were still lagging in ESG integration.
‘All pension funds are implementing ESG criteria,
compared with around two-thirds of
sovereign funds and just over
half of central banks.’
Global Public Investor 2021, OMFIF
Looking back to 2020 less than half of central banks integrated ESG in their investment portfolios: “Actively investing in sustainable assets is less feasible for GPIs given their large size. In contrast, more than 90% of sovereign funds and all pension funds do so”, was quoted in the report.
“More than half of central banks
surveyed do not implement ESG in
reserves management.”
Global Public Investor 2020, OMFIF
Among central banks who do, fewer than 10% do so through thematic or impact investment, although 37% have some holdings of sustainable assets. These are mainly green bonds and tend to be small shares of their portfolios. One survey respondent commented, ‘There aren’t many green bond issues that conform to our investment guidelines, and the ones that do are small.’
50 % of central banks still don’t implement ESG
In 2021 the GIP report published by OMFIF presents an almost unchanged picture: More than 90% of central banks surveyed have already invested in green bonds as part of their reserves; 60% are planning to increase their holdings, compared to only 45% a year ago.
However, 50% of central banks still don’t
implement any environmental, governance
and social considerations in their portfolios,
indicating there is still some way to go
for improving sustainability in
sovereign portfolios.
Global Public Investor 2021, OMFIF
They do not need to look too far for examples of how to do so: 10% of central bank reserve managers say sustainability is one of their most important investment factors.
Active Ownership
More than 50% of central banks now engage in shareholder dialogue and exercise voting rights
Time and cost are the biggest constraints for public pension funds in adopting active ownership
Over 90% of central banks have green bonds in their ESG portfolios
25% of GPIs expect to increase their holdings of green/sustainable equities
Making reserves management sustainable
‘ESG has gone from zero to 100,’ says Johanna Lasker, CEO, North America and head of central banks and official institutions at BNP Paribas Asset Management. While ‘a few years ago, it wasn’t a topic in discussions,’ now, ‘clients often start the ESG conversation with us.’
31% of central banks stated that ESG criteria do not fit with their investment strategy and a further 16% said that they face legal and regulatory restrictions.
Comprehensive approach on SRI
Responsible investment, climate-related risks and environmental, social and governance integration have gained relevance for all types of investors in recent years, including central bank reserves managers. One key aspect is monitoring and reporting.
“Although nearly all eligible asset management firms place great emphasis on the development of their SRI capabilities, we still observe major differences between their approaches regarding the criteria we apply. Therefore, a comprehensive approach with the different aspects is extremely important to select the best SRI manager for a specific portfolio. Equally important is consistent monitoring of the application of the SRI criteria. Here we focus on the reporting and the risk and performance attribution.” Franz Partsch, Director, Treasury Department, Oesterreichische Nationalbank.
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