When Saudi Aramco launches its blockbuster public share offering next year, its commitment to pour billions into renewable energy projects may be a key factor in drawing the attention of a group of institutional investors with $60 trillion under management.
Those investors have all signed on to the Principles for Responsible Investment (PRI), thereby promising to consider environmental, social, and governance (ESG) factors in their investment decisions, Bloomberg reports, in a recent post on Renewable Energy World. By adopting environmental and sustainability goals, Aramco “immediately open themselves up to a larger pool of investors,” said PwC partner Scott Gehsmann. “If a company is looking at raising capital, they typically must have a strategy around sustainability. If they don’t have one, it can be perceived as a negative.”
Saudi Arabia’s initial objective in adopting an ambitious renewables program was to shift more of its oil production from domestic consumption to exports. And “whether greening Aramco’s IPO would boost the value of the offering is an open question, one clouding the debate over how much investors will pay and whether the renewable energy program unfolds as expected,” Bloomberg notes.
But even so, “drawing in a bigger group of investors requires both better environmental and social governance disclosures and the start of a strategy to deal with limits on fossil fuel pollution coming from the United Nations climate deal signed in Paris in 2015.”
Navi Brar, head of advisory for the Middle East and Africa at AccountAbility, said Saudi companies and government ministries have had to scramble to put renewables and ESG programs in place. Some of them “have come to us and said, ‘How do we get our ESG performance up to a level that puts us on a level playing field globally so that investors don’t shy away from us?’” he said. “That has been something that we’ve seen, and I would expect investors to ask for such disclosures from Aramco, as well.”