Corporate Social Responsibility, Presented Simply
With the recent installation of Charles ‘Chip’ Goodyear at the head of Temasek Holdings, the Sovereign Wealth Funds have once again, only men at the helm. From Career Politicians (Tony Tan, GIC) to a former merchant banker with limited international experience (Bader Mohammad Al-Sa’ad, KIA), can the background of these leaders tell us how they will manage the billions under their charge?
Leaders of Sovereign Wealth Funds (Click to Enlarge)
In a move that has shocked the industry, Temasek Holdings, Singapore’s Sovereign Wealth Fund, has selected Charles “Chip” Goodyear, CEO of Mining Giant BHP Billiton (until September 2007), to head the US$124 bn fund.
Chip replaces Ho Ching, the wife of Singapore’s Prime Minister, who oversaw reforms in the fund which began as a sleepy enterprise holding mostly Singapore-based companies like Singapore Airlines and DBS to the international giant it is now holding 19% of Standard Chartered, 4 – 8% of the 4 Leading Chinese Banks and 9% of Merril Lynch (Temasek Holdings Portfolio Highlights: Link Here).
The choice continues a trend which has resulted in 40% of senior management in Temasek Holdings being Non-Singaporean and could be in line with the fund’s aims to dissuade proponents of the idea that the fund has been used to further Political agendas of the Singapore Government with Ho Ching being so closely associated with the state’s Prime Minister.
The installation of Mr. Goodyear in October this year could also herald a new direction for the fund which has traditionally invested heavily in the global financial sector. Observers believe that with Mr. Goodyear, Temasek Holdings will now focus more attention on the Mining and Resources sector (currently only 5% of the funds portfolio) with the future of the Financial Sector remaining turbulent.
Could this also mean a more sustainable approach to investing with Chip’s former firm BHP Billiton making it the “Top 100 Sustainable Corporations” list released at Davos previously blogged (link here) ? We can be idealists and hope.
More Here: Financial Times
Previous Article on Sovereign Wealth Funds: EvolvingChoice
Temasek Holdings Portfolio Highlights: Link Here
The news quickly made the headlines in Singapore Blogs: “Ho Ching is Out of Temasek!”, SGPolitics, Singapore News Alternative, A Poem for Ho Ching
Based on a recommendation from the Norwegian Council on Ethics, the Ministry of Finance instructed NBIM, Norway’s Sovereign Wealth Fund (SWF), to exclude Textron, because the company manufactures a ‘Sensor Fuzed’ weapon, a cluster bomb.
Norway's Council on Ethics
Why the sudden sell off? NBIM has traditionally excluded cluster bomb makers but with the stricter definition of cluster bombs laid out in the recently signed new international treaty banning cluster weapons signed in December 2008, Norway’s Council on Ethics decided to revisit the country’s significant ($36m) investment in Textron, which also owns plane-maker Cessna.
Textron insists that its ‘Sensor Fuzed’ weapon’s advanced technology precludes the possibility of its ordinance remaining unexploded, risk the lives and limbs of innocent civilians.
List of Norway’s SWF Excluded Companies: Link Here
We are looking at clean energy and environmentally-friendly investment (…) everything cross-border except for casinos, tobacco companies or machine-gun companies
Gao Xiqing, China Investment Corporation’s (CIC) President, announced the fund’s intentions to consider responsible and sustainable investment policies at a conference in Beijing on June 13th
This announcement follows another recent speech the CIC President made at an OECD conference earlier this month stressing the SWF’s commitment to transparency. He assured delegates that CIC will be “as transparent as required by any law in any country” but continued with words of caution about expectations of rapid changes,
Our government has never been transparent for 5,000 years (…) we are trying.
As China based the structure of CIC ($200bn) on Singapore’s Temasek Holdings ($159bn) it will not be inconceivable that it has looked at Norway’s Government Pension Fund (NBIM), widely acknowledged as one of the most transparent SWFs, for guidance in improving its practices.
Some of NBIM’s guidelines might prove a challenge for a country with China’s (less than stellar) ethical record to put into practice.
NBIM utilises negative screening to exclude investments that pose a reasonable risk of the fund contributing to:
The good news is that the CIC’s $90bn foreign investment mandate precludes it from investing these funds in the Chinese government.
[Note: Norway has received some attention in the press for applying these principal's harshly on its foreign investment candidates while turning a practically blind eye to Norwegian corporations that engage in activity abroad that would violate those very same principals.]
If adopting Norway’s ethical guidelines seems like too much of a stretch for the CIC in the near future, perhaps it could turn back to Temasek, after all, even without any clearly published policies regarding responsible or sustainable investment, they might have decided that all you need is a great team of graphic designers (meritocratically chosen of course).
Hostility?
Still young (CIC only began operations in September 2007), but already attracting much attention with its high profile investments in Blackstone ($3bn) and Morgan Stanley ($5bn). During its negotations to take a stake in Citigroup, as Wall Street turned to Sovereign Wealth Funds (SWFs) as sources of capital during the subprime saga, however, some of this attention was (in the United States at least) unapologetically negative and protectionist.
Why is it good for a foreign government to have 10% stock of Citigroup when we don’t want to have the US government have 10%? At least the US government would be responsible to US taxpayers.
Edwin Truman, Senior Fellow at the Peterson Institute for International Economics and former US Treasury Department Official.
This hostility could hurt the United States, China has previously highlighted that it could easily abandon its push to invest in US assets and focus on countries that do welcome its large pool of capital, like the United Kingdom.
[Note: Citigroup went on to acquire capital not from CIC but from the Abu Dhabi Investment Authority (ADIA), the Government of Singapore Investment Corporation (GIC) and the Kuwait Investment Authority (KIA)]
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