A successful restructure of the Saudi Arabian Public Investment Fund (PIF) would represent a great opportunity for Saudi Arabia to have a positive impact not only the region, but also the world. The transformation of the PIF is a key aspect of Saudi Vision 2030.
Dr Ioannis Ioannou, Associate Professor of Strategy and Entrepreneurship, London Business School, says: “Vision 2030, if implemented with sufficient realism and practicality, represents a unique opportunity for Saudi Arabia to leverage this important role that capital markets are playing globally, in terms of allocating scarce financial resources towards building a sustainable economy, generating green jobs, promoting environmentally friendly business and establishing socially inclusive organisations.
“For a transformation plan that aims to slash wasteful government spending, develop the non-oil economy by boosting private sector investments and weaning the population off its dependency on cradle-to-grave benefits, it seems to me that there are enormous benefits to be generated through aiming for a sustainable economy.”
Dr Ioannou, whose research focuses on sustainability and corporate social responsibility, cites the success of Norway’s $870 billion (about Dh3.19 trillion) oil fund: “The Norwegian fund is the world’s largest sovereign fund that explicitly integrates ESG issues as an integral part of its investment process,” he says. “To-date, the fund has already divested from 23 palm oil companies and recently excluded four of Asia’s biggest conglomerates precisely over concerns of environmental damage.”
He adds: “In recent years and around the world, the issues of sustainability and social responsibility have come to centre-stage because the challenges that humanity faces today are immense, from climate change to corruption and extreme poverty, to name a few. Sustainability arises as the most viable long-term solution to these severe problems.”
Dr Ioannou also sees positive consequences on the global stage should Saudi Arabia execute its plan successfully. “Such a strategy, if well implemented, will also help better align the country with the Sustainable Development Goals (SDGs) and contribute towards the global effort for a reduction in carbon emissions, as articulated in the Paris Agreement.
“There is no question that the implementation of such a plan will be, at best, challenging. But I think support for the changes, both domestically and globally, is more likely to materialise if the objective of a sustainable, inclusive and transparent economy are genuinely brought to centre-stage.”
With the price of crude oil decreasing by more than 50 per cent in the past 18 months alone, Saudi Arabia — where 70 per cent of government revenue is derived from oil — has signalled its intent to change economic course on the path to sustainability.
