The last few years have seen a surge in the level of public and political interest in sovereign wealth funds. At ADIA, we recognise the importance of building a clear understanding of who we are, what we invest in and why, in order to maintain the strong, trusted relationships we have built with governments and regulators around the world over the past 30 years.
As a long-term investor with a purely economic focus, we believe ADIA plays a role in providing stability to international financial markets, especially during times of economic weakness when others with shorter-term strategies or liquidity needs may have to reduce their holdings.
Over the past several years, we have been at the forefront of efforts to improve understanding of the role sovereign wealth funds (SWFs) play in promoting the free flow of global capital and investments. This included an understanding in 2008 with the US Department of the Treasury and the Government of Singapore Investment Corp. on a series of "policy principles" to govern both our investments and the behaviour of recipient countries.
Then, in May 2008, ADIA took this one step further by agreeing to act alongside the International Monetary Fund as co-chair of the International Working Group (IWG) of sovereign wealth funds. The IWG, which comprised representatives from 26 countries, was created to demonstrate – to home and recipient countries, and the international financial markets – that SWFs had robust internal frameworks and governance practices and that their investments were made only on an economic and financial basis.
The goal was to create an agreed framework of Generally Accepted Principles and Practices that reflected appropriate governance and accountability arrangements, as well as the conduct of investment practices by SWFs on a prudent and sound basis. This was achieved in September 2008 when the IWG’s members signed the so-called “Santiago Principles” in Santiago, Chile. The Principles are underpinned by the following guiding objectives for SWFs:
1. To help maintain a stable global financial system and free flow of capital and investment;
2. To comply with all applicable regulatory and disclosure requirements in the countries in which they invest;
3. To invest on the basis of economic and financial risk and return-related considerations; and
4. To have in place a transparent and sound governance structure that provides for adequate operational controls, risk management and accountability.
A key element of this process was the expectation that if SWFs complied with the Santiago Principles, recipient countries would recognise and respect their compliance, and would not subject SWFs to any requirement, obligation, restriction, or regulatory action exceeding that of other investors.
While the Santiago Principles are voluntary, members are expected to support them and either implement or aspire to implement them. In fact, a condition of membership in the ongoing International Forum of Sovereign Wealth Funds, established by the 26 member countries in Kuwait in April 2009, is endorsement of, or in effect, compliance with, the Principles.
Having participated in the design, development and drafting of the 24 principles, ADIA created a multi-disciplinary team to conduct a thorough internal compliance review, taking into consideration our governing law, rules, regulations and operations. Through this self assessment, we have verified and hereby confirm ADIA’s compliance with the Santiago Principles. Accordingly, we welcome all opportunities to invest in recipient countries on a basis consistent with the Santiago Principles.
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