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International Monetary Fund and representatives of twenty-six Sovereign Wealth Funds agreed a voluntary set of guidelines in Santiago this September.

A The Santiago Principles

The Santiago principles, which when eventually published are expected to number twenty-four, set out the legal, institutional, and macroeconomic strategies adopted by each fund, including information about the risk appetite. According to the co-chair of the International Working Group drafting committee, the ‘governance and accountability arrangements give considerable comfort especially in the area of the separation of operations of the sovereign wealth fund from its owner, and the investment policies and risk management together with the other things are intended to make it clear that sovereign wealth funds act from a commercial motive and not other motives.’89 Although no formal surveillance mechanism is envisaged, the co-chair of the International Working Group, the Under Secretary at the Abu Dhabi Department of Finance, Hamid Al Suwaidi, gave an explicit assurance that compliance could be achieved: “This is a voluntary set of practices. The sovereign wealth funds will publicly announce their adoption of the GAPP once it’s approved. And then it’s for the public really to see where the respective funds are adhering to these principals and practices.”90 What that means in practice is exceptionally difficult to determine.

The governance procedures followed by the Norwegian Government Pension Fund – Global provides one potential way forward. Its terms of reference necessitate that detailed information is provided about where it invests and how it exercises its ownership obligations.91 While there are corporations that the fund simply will not invest in (for example those involved in the arms trade), the fund also adopts a pragmatic teleological or consequential approach to ownership. It ‘aims to be a leader in active ownership and develop strategies and priorities that can win the support of



As it most recent annual report makes














89 D Murray (Press Conference, International Working Group on Sovereign Wealth Fund Regulation, Santiago, 2 September 2008).

90 H Al Suwaidi (Press Conference, International Working Group on Sovereign Wealth Fund Regulation, Santiago, 2 September 2008).At the same time, distinct limits on disclosure are envisaged. The Australian representative noted sovereign wealth funds have to compete in the market, and there are two implications of that, one in terms of the confidentiality of arrangements that other people make with sovereign wealth funds and the protection of that confidentiality, and the confidentiality of their day-to-day transacting, but also the notion that if other parties in the market believe that a sovereign wealth fund can be forced to disclose certain information, then that would close down the range of people who would be prepared to deal with sovereign wealth funds.So disclosure is important, but as with an other institutional investor, there must be a limit which protects confidentiality of dealings for sovereign wealth funds and their counter parties.’ see D Murray (Press Conference, International

Working Group on Sovereign Wealth Fund Regulation, Santiago, 2 September 2008).

91 Norges Bank Investment Management Annual Report (2007) 4.1. This process is buttressed by an external Council on Ethics. The Council has the power to exclude a specific corporation in the event that investment is deemed to carry a significant risk of complicity. This message has been exported in recent weeks by the Governor of the Norges Bank; see S Gjedrem, ‘Ethics and the Government Pension Fund – Global’ (Speech delivered at Investing for the Future Conference’, Oslo, 16 January 2008); K Halvorsen, ‘Sovereign Wealth Funds as Serious Financial Investors’, Financial Times (London), 15 February 2008.




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