Benefits of SRI for Sovereign Wealth Funds

A large sovereign wealth fund (SWF) based in a resource-rich nation has set a long-term investment horizon to ensure stable and sustainable income for future generations. The fund invests broadly in global equities, fixed income, and alternative assets. Recently, the fund's management team is considering implementing a new asset allocation strategy in response to increasing volatility in financial markets and a prolonged low-interest-rate environment.

As part of this consideration, the fund's board would like to understand the impact of incorporating sustainable and responsible investing (SRI) principles into their portfolio. They are exploring whether this new strategy could enhance risk-adjusted returns and align with their mandate of benefiting future generations.

Which of the following statements best captures the potential benefits of SRI for sovereign wealth funds like this one?