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Sovereign Wealth Funds: opportunity or threat for the green economy?

Working Papers N°01/2013. Iddri, 2013. 12 p.

Un article consacré aux fonds souverains. Quel est leur fonctionnement ? Quels sont leurs intérêts stratégiques ? Comment ciblent-ils leurs investissements, sur quels secteurs d'activités ? Et dans quelle mesure peuvent-ils contribuer à la transition vers une économie verte ?

Points clés [en anglais] :

SOVEREIGN WEALTH FUNDS: A GROWING FORM OF STATE CAPITALISM

Owned or controlled by States, albeit separate from central banks, Sovereign Wealth Funds (SWFs) draw their revenue from either natural resources or from trade surpluses. With the massive accumulation of foreign reserves, these institutions have moved away from a passive approach to asset management to a more long-term proactive investment strategy, embodying a form of State capitalism. In 2011, these funds managed assets worth USD 3,000 billion (from 500 billion in 2003) and made 237 direct investments worth USD 81 billion (a 15% increase in the number of investments and a 42% increase in their value compared to 2010).

THAT INDUCES SOMES RISKS INTO THE GLOBAL ECONOMY

The growing influence of SWFs raises questions regarding: the consequences on the economy and finance of the home country, should these investments be mismanaged; the concern that these funds may pursue strategic, non-financial interests; the risk of protectionist retaliation by host countries against such strategic behaviour; and the uncertain impact on the international financial markets and global economy. These risks need to be carefully assessed, and managed.

BUT IS ALSO AN OPPORTUNITY FOR THE TRANSITION TO A GREEN ECONOMY

SWFs are long-term institutional investors. Unlike some private investors, they steer clear of the unbridled scramble for immediate profits. And contrary to pension and mutual funds or insurance companies, they have no long-term debt and no obligation to make future payments at fixed dates. A small number of highly dynamic funds are working to set up a common financing platform for green infrastructure. This positive move must be accompanied and supported, without naivety, but also with open-mindedness.