Challenges in Integrating ESG in SWF Investment Strategies

A Sovereign Wealth Fund (SWF) in a developing country has recently revised its investment strategy to emphasize sustainable development while also seeking to optimize returns. The fund manager is evaluating the potential benefits and risks of increasing allocations to renewable energy projects, which aligns with the national policy of reducing carbon emissions. One key consideration is how these investments might impact the fund's liquidity and overall risk profile. Additionally, the fund is weighing the implications of adopting an Environmental, Social, and Governance (ESG) framework in its investment process.

What major challenge is the fund likely to face when integrating ESG criteria into its investment strategy while maintaining adequate liquidity?