RIYADH: Saudi Arabia’s Public Investment Fund has expanded its green project investment plan to over $19.4 billion, covering 91 eligible projects in areas such as renewable energy and clean transportation.
In its second ‘Allocation and Impact Report,’ PIF provided an update on the allocation and impact of its green bonds as of June 30.
The new paper revealed that “PIF has currently identified a capital expenditure portfolio of over $19.4 billion of eligible green projects, of which $8.5 billion has been earmarked to be allocated under PIF’s two green bonds,” referring to those issued in 2022 and 2023 — totaling a combined $8.5 billion.
According to the report, there are 18 operational projects categorized under renewable energy, energy efficiency, green buildings, clean transportation, as well as sustainable water management, pollution prevention, and sustainable management of living natural resources and land use.
The Saudi sovereign wealth fund has allocated $457 million for these projects, with $372 million for eight green building projects.
The remaining $18.9 billion was allocated to 73 under construction projects spanning the same categories, with green buildings also taking the largest share at $6.3 billion for three projects.
Prominent green projects
PIF’s green bond proceeds are being funneled into a wide range of projects to reshape Saudi Arabia’s future. One of the most prominent undertakings is Red Sea Global, a tourism development owned by PIF.
According to the report, PIF has allocated $1.7 billion of green financing for The Red Sea and AMAALA, as of 30 June 2024.
PIF’s investment qualifies under the ‘Green Buildings’ category in the Green Finance Framework, which means that new or existing commercial or residential buildings must get a third-party certified green building standard to be eligible for funding.
The Framework published in 2022 is used as the basis to issue green bonds, sukuk, loans and other debt instruments, known as green financing instruments.
PIF said in the report that RSG is committed to regenerative tourism destinations that preserve and enhance the natural environment.
Spanning 32,000 square km, RSG’s portfolio includes The Red Sea and AMAALA projects, which will offer up to 11,000 keys across 80 hotels, as well as residential and hospitality assets built with sustainability at their core.
As for the impact of this project, the report added that to date, “there are nine green buildings that are already operational, including four hotels, four residential clusters and one management office.”
On average, these buildings achieve 20 percent energy savings compared to conventional buildings, totaling 18,000 MWh per year. As these assets are independent of the national grid and are 100 percent solar powered, they avoid 36,000 tCO2e annually.
“When all the assets are completed across both destinations, total avoided emissions will exceed 600,000 tCO2e per year,” the report said.
Under the “Sustainable Water Management” category, the report added the NEOM Water Distribution project. PIF’s contribution to this project included fully funding NEOM’s water transmission and distribution pipelines and allocating over $1 billion to support nine water transmission projects across the region.
“This key category emphasizes that investments and expenditures in projects and infrastructure must enhance water-use efficiency,” the wealth fund said.
To date, a 12-bay tanker filling station supplying 18,000 cubic meters per day of potable water and a 30-kilometer section of distribution pipeline is already operational, the report revealed.
It said that an additional three filling stations and over 500 kilometers of water transmission pipeline are currently under construction, adding: “Once completed, these assets will improve resilience and support de-risking of water scarcity in Saudi Arabia.”
Measurable impact and ESG leadership
Projects funded by PIF’s green bonds are set to generate enough renewable energy to power 160,000 homes annually and save 7.7 million MWh through energy-efficient technologies, including the installation of over 211,000 energy-efficient bulbs and 6,000 HVAC systems.
In the area of water sustainability, PIF’s investments in desalination and wastewater treatment are projected to treat 49.4 million cubic meters of wastewater and desalinate 1.2 million cubic meters of seawater each year.
Green building projects funded by the bonds are expected to save 711,000 MWh annually, supporting Saudi Arabia’s efforts to cut energy consumption and carbon emissions.
PIF’s green finance strategy is also setting global benchmarks. As a founding member of the One Planet Sovereign Wealth Funds initiative, PIF is integrating climate change into its investment strategies.
Ranked seventh globally and first in the Middle East in the Global Sovereign Wealth Fund’s Governance, Sustainability, and Resilience Scoreboard, PIF’s efforts highlight its global environmental, social and governance leadership.
To ensure transparency and accountability, PIF has established an ESG and Sustainability Steering Group.
The body meets quarterly to monitor fund allocation, track project impacts, and ensure all green bond investments align with PIF’s Green Finance Framework. This governance structure underscores PIF’s commitment to sustainability and strong ESG practices.
A global first for green bonds
In October 2022, PIF issued its first-ever $3 billion multi-tranche green bond, described as “the first green bond by a Sovereign Wealth Fund.” This was followed by a larger $5.5 billion offering in February 2023, both of which were well-received by global investors.
By June 2023, PIF had allocated $5.2 billion of the $8.5 billion raised to environmentally-focused projects. It had identified a green project portfolio worth $11.7 billion, with $8.5 billion designated for bonds.
Already, $1.3 billion has been used for initiatives like renewable energy, energy efficiency, and sustainable water management.
Of the $706.2 million from the October issuance, $458.6 million went to green buildings, $138.2 million to energy efficiency, and $45.2 million to water management. Similarly, $629.2 million from the February issuance was allocated to renewable energy, energy efficiency, and clean transportation.
Unallocated funds are managed under PIF’s liquidity policy, ensuring all investments align with its ESG principles. Notably, the October issuance included a 100-year tranche, signaling PIF’s long-term commitment to sustainability.
The success of these bonds is evident in the February issuance being six times oversubscribed, with orders exceeding $33 billion, showing strong global investor confidence in PIF’s leadership in green financing.
Vision 2030 and PIF’s role in economic diversification
PIF’s green bond strategy is deeply intertwined with Saudi Arabia’s Vision 2030 — a transformative blueprint aimed at diversifying the country’s economy away from oil dependency and establishing new economic sectors that are future-facing and sustainable.
PIF is tasked with leading the charge, playing a key role in supporting the nation’s commitment to achieving net-zero carbon emissions by 2060.
The fund has set its target to reach net-zero emissions by 2050, positioning itself as an integral player in the global fight against climate change.
The organization’s mandate under Vision 2030 includes expanding non-oil gross domestic product, generating jobs, and enhancing local content, as well as nurturing a thriving private sector.
PIF is attracting sustainable investments into Saudi Arabia’s eco-conscious economy by issuing green bonds and funding critical projects in renewable energy, energy efficiency, water management, and pollution control, among others.
The initiatives are expected to contribute significantly to the Kingdom’s economic growth while ensuring environmental sustainability.
