Key Takeaways
- The Santiago Principles—voluntary guidelines adopted in 2008 for the governance and operation of sovereign wealth funds (SWFs)—are in urgent need of revision, as these SWFs manage an estimated $14 trillion in assets in a very different global economy and investment climate.
- SWFs should disclose more clearly their risk management policies, procedures, and practices and their approach toward investment decisions that are directed in whole or in part at noneconomic considerations.
- These funds should publish external audits by independent, outside experts.
- SWFs should assess the financial risks of climate change for their portfolios and reveal more about how their investments do or do not contribute to reducing the global threat of climate change.
Body
The Santiago Principles have played a critical role in strengthening the governance and transparency of sovereign wealth funds. They also helped ease concerns about SWFs before 2008 and supported the smooth functioning of global financial markets. Yet the global financial landscape has changed significantly over the past 20 years. To remain credible and effective, the Santiago Principles should be updated to reflect these changes and address the risks SWFs pose to their home and host economies and to the international financial system.
