Saudi Arabia's PIF calls for sustainable investing to redesign global economy

Global investment community has 'unprecedented opportunity' to reshape the economic landscape, the fund's governor says

Delegates at the fourth edition of the Future Investment Initiative conference at Riyadh's Ritz-Carlton hotel. Saudi Arabia opened the two-day investment forum where around 100 speakers are set to participate virtually. AFP

Saudi Arabia's Public Investment Fund urged the global investment community to capitalise on the "unprecedented opportunity" offered by the Covid-19 pandemic to transform the global economic landscape.

“Too much has changed and needed to change. An unprecedented opportunity now exists for fresh thinking," Yasir Al Rumayyan, the governor of the PIF, said on Wednesday.

“The global investment community has an opportunity today to design strategies that [can] redesign the world economy," he said during the opening address at the fourth edition of the Future Investment Initiative.

"Everyone of us has a role to play."

The sovereign wealth find, which is funding mega developments in the kingdom including the Red Sea Development and entertainment district, Qiddiya, launched “The Line” a new city at its flagship $500 billion megaproject, Neom, earlier this month.

The new project, designed to allow residents to “fulfil all of their daily requirements within a five-minute walk", will have zero emission and will be fully powered by renewable energy, Saudi Arabia's Crown Prince Mohammed bin Salman said on January 10, when he announced the projects.

“There will be big spending … [and] infrastructure itself will be between $100bn to $200bn,” Mr Al-Rumayyan, later told an FII panel discussion.

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“We have a focus on renewable energy and, we have started the first green energy project in Neom and we already got international investors with us, co-investing in this project,” he added.

Environmental, social and governance standards, he said, remains at the heart of the sovereign wealth fund’s investment decisions.

“ESG is basically one of the first thing that we look at, especially the E[nvironment] part, which is the moral objective,” he said. “We take the ESG very seriously in Saudi Arabia and especially within the PIF since we own many portfolio companies.”

Saudi Arabia, the Arab world’s biggest economy, is radically transforming its economy under its Vision 2030 programme to reduce its reliance on oil revenues. Attracting foreign investment into the kingdom's non-oil economy is one of the central planks of Riyadh’s economic blueprint.

The PIF, which is at the heart of the kingdom’s diversification ambitions, launched a five-year strategy to more than double its assets to $1.07 trillion and contribute $320 billion to the kingdom's non-oil gross domestic product on January 25. The fund, which manages more than $400bn in assets, plans to invest a minimum of $40bn a year into the domestic economy until 2025 and help create 1.8 million jobs.

The PIF, which invests at home and abroad, has identified 13 new sectors for investments including healthcare, renewables, telecoms, media and technology, entertainment, food and agriculture, automotive, transportation and aerospace.

“The variety, or the menu of investments in Saudi Arabia, is really big … this is the proposition through the PIF and through the private sector and the government.”

Mohammed Al Jadaan, the kingdom's minister of finance and acting minister of economy and planning, said there are "huge opportunities" coming up in Saudi Arabia for investments.

"Some of them are in conventional industries, but some industries that we are really, really focused on include climate change … and renewables," he told a separate panel discussion on regional economic resilience.

John Studzinski, managing director and vice chairman of investment management firm, Pimco, said the Covid-19 pandemic is really the first crisis that has brought sustainability to the fore.

"It is really the wake up call to why ESG has to be taken first and foremost, seriously," he told the conference.

Although climate activists have done their bit to force CEOs to think about sustainable investment, "what CEOs are now finding out is that employees [and] consumers are the biggest activists", he said.

"They are expecting companies to be totally [ESG] compliant in terms of their operations but they are also expecting their pension fund options to be entirely ESG-compliant as well," he added.