Question

Why will Sovereign Wealth Funds (SWS) that are often flush with oil revenues invest in green energy and other sustainable investments?

Answer 1

Sovereign Wealth Funds are funds which are created from nations surplus revenues like wealth from Oil revenues, trade surplus, foreign currency operations, money from privatization etc. The Sovereign wealth fund is created as a way for reinvest rather than keeping the money in idle state.

Many such funds are formed from oil revenue and they invest in green energies like Solar energy, Hydro electric projects, Wind etc. This is because every fund will be investing in industries or areas which have enormous growth potential and is expected to flourish in the coming years. From a present perspective it can be seen that the world as a whole is converging towards the green energy resources and are trying to stay away from fossil fuels. Due to this, the lifespan of Oil sector is limited and a drastic reduction in consumption of such energy is expected in coming years( appx 20-30 years from now).

The State and the companies are aware of this and as a part of diversification, the state owned companies are investing in green energy through Sovereign wealth funds so that even if there is any reduction in consumption, the countries revenue and hence stability will be sustained. Such investments are also as a part of green initiative policies by the countries which are committed to diversify away from fossil fuel resources.