PIF: big on Aramco, big on green bonds

19/04/2023

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Press reports indicate that 4% of Saudi Aramco (Ticker: ARAMCO) will be transferred to the Saudi sovereign wealth fund, Public Investment Fund (PIF) (Ticker: PIFKSA), with a market value estimated at $80bn, resulting in nearly a quarter of PIF’s assets as shares in Aramco.

Simultaneously, PIF has been the second most active global issuer of ‘green’ bonds in the past six months, bringing two three-tranche deals for a total size of $8.5bn.

We encourage the market to discuss the suitability of PIFKSA ‘green’ bonds in green funds, due to the high projected emissions of Aramco. Notably, PIF has only issued ‘green’ and not traditional bonds; the full bond capital structure is use-of-proceeds constrained green bonds, totalling $8.5bn.

PIFKSA ‘green’ bonds now constitute a significant holding in several sustainable debt funds. For example, it is the second largest holding in the iShares USD Green Bond ETF, driven by PIF being such a significant proportion of recent issuance.

PIF’s key financial risk is Aramco, one of the world’s largest greenhouse gas emitters. As its debt liabilities are exclusively ‘green’ bonds, there can be no segregation of assets funded by sustainable capital as opposed to traditional debt.