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Bond spotlight

PIF: big on Aramco, big on green bonds

Written by Josephine Richardson & Ulf Erlandsson

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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.

About the authors

Josephine Richardson

Josephine Richardson

Managing Director, Head of Research

Based in London, Jo leads AFII’s research and a global team supporting fixed income investors as they align their portfolios with climate and sustainability goals. She joined AFII after 18 years in fixed income markets at JPMorgan.

Ulf Erlandsson

Ulf Erlandsson

Founder, Board member

Dr Ulf Erlandsson founded the Anthropocene Fixed Income Institute and was its first CEO. A pioneer of climate-focused fixed income portfolio management, he was named Environmental Finance’s Bond Personality of the Year 2022.

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