State-owned asset pools are less resilient than they should be, with many yet to develop safeguards for risk, a report released Thursday showed.
Sustainability, however, is a growing concern, with sovereign wealth funds and public pension funds analyzed by Global SWF making moves before climate change hits returns.
Global SWF's Governance, Sustainability and Resilience scoreboard looked at 25 factors: 10 related to governance, transparency and accountability; 10 related to sustainability and responsible investing; and five looking at resilience and legitimacy. The study was applied to 100 major state-owned investors.
For the second year in a row, the A$178.6 billion ($135.4 billion) Future Fund, Melbourne, was the only fund to score positively on all parts of the study.
Three asset owners achieved a 96% score in the study: the $1.3 trillion Government Pension Fund Global, Oslo; the NZ$58 billion ($40.9 billion) NZ Super, Auckland; and Caisse de Depot et Placement du Quebec, Montreal, which had C$365.5 billion ($285.9 billion) in assets as of Dec. 31.
At the other end of the scale, Middle East-based funds lagged. COVID-19 and low oil prices triggered significant withdrawals from wealth funds in the region, Global SWF said in a report of its study, with most found to be "swimming naked."
Some funds performed particularly badly, with CEOs fired overnight, managers prosecuted for the misuse of public funds and governance crises — some of which are "still too common in the industry," the report said.
Overall, the top 100 funds scored 6.7 out of 10 on governance vs. 6.6 in the 2020 report; 5.1 out of 10 on sustainability vs. 5.2 in 2020; but 2.5 out of 5 for resilience vs. 2.4 in 2020. The report said the resilience scoring highlighted the impact of the COVID-19 pandemic on funds, with some being "exhausted" to help shore up a country's finances.
The GSR report is available for download on the Global SWF website.