- Sovereign Wealth Fund Weekly News Roundup — SWFs Grapple With ESG Issues
Sovereign Wealth Fund Weekly News Roundup — SWFs Grapple With ESG Issues
The sovereign wealth funds of New Zealand and Norway were
both faced with environmental social and governance issues this
week. And several funds published their annual reports.
Doing Well By Doing Good?
Norway’s $870 billion sovereign wealth fund Government Pension Fund Global was
criticized this week for failing to monitor governance
standards at companies it invests in. Representatives of
Sweden's shareholder association and AP4, one of the country's
pension funds, challenged Norges Bank Investment Management
(NBIM), the arm of the central bank that manages the giant
fund, over its investment in Svenska Cellulosa Aktiebolaget
(SCA), a Stockholm-based paper company in which it owns an 8
percent stake. SCA is embroiled in a corruption scandal
centering on alleged abuse of expenses claims by company
executives. NBIM approved a motion at SCA’s annual
meeting in April that discharged directors of personal
liability for management of the company’s affairs
shortly before news of the scandal emerged.
And a Norwegian NGO has called on the NBIM to divest its nearly
$1 billion stake in Atlanta-based Coca-Cola Company. In a
report, Oslo-based Foreningen for Internasjonale Vannstudier
(the Association for International Water Studies) says NBIM
should sell its shares in the soft drink company because of its
practices in India, which it says have depleted local water
supplies and led to shortages. FIVAS says these activities
contravene NBIM's guidelines on sustainable water management
for the companies it invests in.
The double-barreled criticism illustrates the challenges funds
face in trying to implement environmental, social and
governance (ESG) policies. The $21.5 billion New Zealand Superannuation Fund has
brought in external help — on Tuesday it announced the
appointment of Toronto-based BMO Global Asset Management to
help it engage with portfolio companies on such issues. BMO
will ensure the companies NZ Super invests in are complying
with the fund's ESG guidelines. BMO will also provide two other
New Zealand public pension funds — the Accident
Compensation Corp. and the Government Superannuation Fund
— with similar services as part of the agreement.
A Flurry of Annual Reports
Annual report season is in full swing — with four
sovereign wealth funds disclosing their financials this week.
The reports make for a mixed bag.
China Investment Corp. (CIC) revealed it
managed assets of $746.7 billion as of December 31, 2014, up
from $653 billion a year earlier, with net income rising 2.5
percent to $89.1 billion. However, returns on overseas
investments declined for the second year running to 5.47
percent, down from 9.3 percent in 2013.
Investment Corp. of Dubai (ICD) said its
profits were up 63 percent in 2014, thanks to strong
performance at its portfolio companies, such as Emirates Group,
the aviation giant. ICD managed assets of $183 billion as of
December 31, 2014. The International Petroleum Investment Co.
(IPIC), of neighboring Abu Dhabi, fared worse — the
fund’s profits declined by 37 percent in 2014 as
the fall in oil prices dragged down its earnings.
IPIC’s overall assets stood at $66.4 billion at
the end of 2014, down from $68.4 billion a year earlier. The
fund attributed the decline to its use of cash to reduce its
The Alberta Heritage Savings Trust Fund
(AHSTF), the Canadian province's sovereign wealth fund,
returned 12.5 percent in the fiscal year 2015, which ended on
March 31. AHSTF's latest annual report shows that Alberta
Investment Management Corp., which manages the fund, increased
its allocation to alternative assets from 27 percent to 29.7
percent of its portfolio. AHSTF's assets stood at C$17.9
billion as of March 31, 2015, up slightly from C$17.5 billion a
year earlier. In U.S. dollar terms, however, the
fund’s assets declined from $16.3 billion to $14.1
billion, reflecting the strength of the currency over the
GIC Invests in Indian Property
Singapore’s GIC added to its Indian property portfolio
this week. Brigade Properties, a joint venture between the $342
million sovereign wealth fund and Bangalore-based real estate
developer Brigade Group, reportedly purchased a plot of land
near the Indian city of Chennai for 5.5 billion Indian rupees
($86.3 million). The partners are reportedly planning to
develop a mixed-use retail and residential complex on the site,
similar to their Brigade Gateway project in Bangalore.
GIC also allocated capital to Mumbai-based mortgage lender
Housing Development Finance Corp.’s new $500
million real estate fund. According to local media sources, GIC
invested alongside the $34.4 billion State General Reserve Fund of the Sultanate of
Oman. The new fund will finance the development of
affordable housing across India.