The Columbia Center on Sustainable Investment and the Natural Resource Governance Institute co-hosted “The $3.5 Trillion Question: How To Make Natural Resource Funds Work For Citizens,” the launch of a significant report and panel discussion on sovereign wealth fund governance in natural resource-rich countries. Attendees received copies of the research, and had the opportunity to engage with experts in natural resource governance, institutional investing, and public finance.
* Daniel Kaufmann, President, NRGI
* Gawdat Bhagat, National Defense University
* Martin Sandbu, Financial Times
* Malan Rietveld, Economics and Policy Researcher, CCSI
Given their collective size (approximately $3.5 trillion in assets as of the end of 2013), their growing number (approximately 30 new funds since 2000 with over a dozen more being considered) and concerns about the motivations of their government operators, much has been written on natural resource funds—by definition a subset of sovereign wealth funds—their investments, and their global influence as institutional investors. However, their impacts on governance and public financial accountability at home have received far less attention.
These funds, which belong to the public and are financed by extraction of non-renewable resources, should serve the public interest. Citizens in Chile, Norway, many Gulf countries and the several U.S. states have experienced their benefits. Unfortunately, natural resource funds have often undermined public financial management systems and been used as sources of patronage and nepotism in many countries, with dramatic results.
We have conducted a world-wide survey of 22 natural resource funds, examining their management, investments, transparency, and accountability to the public, as well as the fiscal rules that govern them. Based on our findings, we are recommending a six-step process for promoting good natural resource fund governance and have set up a website for government officials, legislators, civil society and the media as the go-to resource on natural resource fund governance. The fact sheet on the project can be found here.