The Role of ESG Responsible Investing to Attract Investments from GCC Sovereign Wealth Funds’

Abstract

Environmental, social, and governance (ESG) factors are at the forefront of global asset management. Due to the long-term financial returns and positive social effects of ESG responsible investing, they have been incorporated into the investment decision-making and risk management of Sovereign Wealth Funds (SWFs). This study examines the impact of ESG-responsible corporate investments on the investment scope of GCC sovereign wealth funds. Additionally, we investigate the various implications of ESG factors in garnering the investment of GCC SWFs, which has some bearing on the discussion of GCC SWFs' investment preferences. According to the study's findings, ESG-responsible investing is a significant factor in recruiting GCC SWF investments, particularly in terms of social and governance factors. The analysis reveals a positive correlation between ESG ratings and GCC SWF investments. Therefore, GCC SWF investment strategies progressively incorporate ESG factors. Incorporating environmental, social, and governance factors into investment strategies necessitates integrating ESG metrics and analysis into decision- making as part of an integrated approach, not as an add-on, and that there are significant value- creation opportunities in doing so. The connection between environmental, social, and governance factors and sovereign wealth fund investments should encourage managers to implement appropriate strategies to attract GCC SWF investments and accomplish coordinated development.