ESG Integration in Sovereign Wealth Funds Amid Climate Risks

As a portfolio manager for a sovereign wealth fund (SWF) in a country facing significant climate change risks, you are required to evaluate the implications of ESG (Environmental, Social, and Governance) investing on the fund's long-term strategy. The fund has a dual mandate to ensure sustainable capital growth while aligning with the nation's commitment to net-zero emissions by 2050. Discuss the specific considerations you must take into account when integrating ESG factors into the investment strategy. In your discussion, be sure to address potential challenges in asset selection, performance measurement, and stakeholder engagement. Support your analysis with examples and contextual understanding of how you would navigate these complexities.