Van der Zee: In between two societal actors – The responsibilities of sovereign wealth funds towards human rights and climate change

Abstract:

Sovereign wealth funds (SWFs) are long-time investment funds, owned by the government. They are able to exert influence on the behaviour of corporations through their investment policy. Due to the expanding number of SWFs, host states became concerned that investments by SWFs could be politically motivated. To ensure host states that an SWF has no political motivations, but merely seeks profit, the Santiago Principles were established. However, in a time where private actors are pressed to focus more on social values and becoming ‘socially responsible’, it seems strange that SWFs are pressed into a model of private behaviour with the objective of only maximizing financial and economic values and merely seeking profit. This paper explores the scope of responsibilities of SWFs towards social responsible investment (SRI). The paper provides a definition of SWFs, and examines the concept of socially responsible investment, the concept of fiduciary duty, and the concept of due diligence. Part of the study comprises an evaluation of 38 investment funds, which all qualify as an SWF as per the author’s definition of SWFs. Through desk research, the legal basis, governance structure and objectives of each of the SWFs were examined. Moreover, it was found that one quarter of the examined SWFs has adopted private regulatory regimes towards SRI. It is concluded that SWFs, due to their link to the state, are in a preferable position to become leaders in the sustainable investment field.

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