Global SWF Releases 5th Edition of its GSR Scorecard

 

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Global SWF celebrates the 6th anniversary of its establishment. 

As part of the events around the anniversary Global SWF distributed the following press release announcing the distribution of its 5th Annual GSR scorecard:

Global SWF turns six today, and we celebrate it with the fifth edition of our GSR Scoreboard, which assesses the progress of Sovereign Investors around Governance, Sustainability, and Resilience.

The annual assessment has become the yardstick for the industry’s best practices as it is rigorous, quantitative, and fully independent. This year’s main takeaways include:

*Sovereign Investors continue to enhance best practices globally and the average GSR score slightly increased to 61%.
*This year, the system was modified to incorporate contemporaneous elements around sustainability, such as adherence to frameworks and commitment to net-zero.
*Five out of the 200 institutions achieved a perfect score: Canada’s CDPQ and BCI, Ireland’s ISIF, Singapore’s Temasek and NZ Super.
*The Middle East as a region continues to improve, with progress led by Saudi Arabia’s PIF (96% in 2024) and Abu Dhabi’s Mubadala (92%).
*There continues to be a positive and strong correlation between best practices and the financial performance of Sovereign Investors in the long run.

The report also includes a market update of what we saw in the first half of the year – in our usual fashion: plenty of data, in a user-friendly format, and with no lag in time.

*Financial markets continue to improve, which has translated into new historical peaks for both SWFs (US$ 12 trillion) and PPFs (US$ 24 trillion) in terms of AuM.
*Investment activity is picking up: US$ 96.1 billion in 236 transactions, with the average deal size increasing to US$ 410 million.
*The “Oil Five” (Saudi’s PIF, Abu Dhabi’s ADIA, Mubadala and ADQ, and Qatar’s QIA) continue to drive the market and are more active than their global peers.
*Investment in green assets is still more significant than in black assets, despite some large transactions in the oil and gas industry.
*On the way forward, geopolitics and market uncertainty remain key concerns, but we expect rising activity and number of funds and offices.

The web-based report can be accessed openly at https://globalswf.com/reports/2024gsr. The icon on the top right-hand corner allows to view and print the pdf, which reads best on a two-page view.

The GSR Scorecard's Executive Summary follows. Consider the ways that Sovereign Wealth Funds are tranforming themselves--the convergence between public and private, and private and public continues. What appears to be emerging are a coordinated set of financial and investment entities--stretching from the purely "private" to the purely "public" in organization which all of which align around principles of private investing that furthers public policy and objectives. These are mediated by the intermeshing of techno-bureaucracies in state and private organs.

 

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Executive Summary

Main findings of this year’s assessment

We are delighted to present the 2024 GSR Scoreboard, the most comprehensive analysis on the Governance, Sustainability and Resilience (“GSR”) practices and efforts of the world’s major State-Owned Investors (“SOIs”), including Sovereign Wealth Funds (“SWFs”) and Public Pension Funds (“PPFs).

The assessment tool was first introduced by Global SWF in 2020 to jointly address important aspects such as transparency and accountability, impact and responsible investing, and legitimacy and long-term survival. Five years later, the system is embraced as a key metric among sovereign and pension funds globally.

The scorecard is designed to be fully independent (as we are not commissioned by anyone to do it), quantifiable (assessing progress over time), and objective (based only on publicly available information). The scoring is based on 25 different elements: 10 related to governance, 10 to sustainability, and five to resilience, which are answered binarily (Yes / No) with equal weight and then converted into percentage points.

The 2024 edition makes two important updates. First, we introduce three new elements around sustainability that seek (i) exclusion lists or engagement policies; (ii) adherence to best practice frameworks such as TCFD or SASB; and (iii) commitment to net-zero goals. In addition, we re-shuffled all elements into sub-categories (see page 12), so that the reader can better follow the rationale and structure of the scoreboard.

The preliminary results were sent on May 10 to all 200 funds, which were given five weeks to provide any comment or additional information. We were pleased to see an increased level of engagement, and since we launched the system, almost 50% of the funds have engaged, acknowledged and debated the scores.

The results of the 2024 GSR Scoreboard are remarkable. We observe a slight increase in the overall score across funds from 60% in 2023 to 61% this year. The improvement has been similar among sovereign and pension funds; and especially around sustainability, as funds are increasing their impact activities and commitments, and reporting them in a regular and meaningful way.

The regional diversity of the leaderboard is testament to the fairness of the assessment tool. The GSR Scoreboard is a great equalizer and sovereign investors demonstrate that best practices are not only found in Western markets and among the largest institutions.

The overall ranking is led by two Canadian pension managers (British Columbia’s BCI and Québec’s CDPQ), and three sovereign wealth funds (Ireland’s ISIF, Singapore’s Temasek, and New Zealand’s NZ Super). The latter claimed once again the best financial performance in the past decade among SWFs (see page 9), and we are pleased to showcase their success in an extensive feature and interview with its Head of Sustainable Investments on pages 31-35 of this report.

Following the five leaders is a group of nine high-scoring institutions: two from North America (CPP, OTPP), three from Europe (NBIM, KENFO, COFIDES), one from the Middle East (PIF), one from Africa (NSIA), and two from Australia (Aware Super and REST Super). The presence of the Saudi Arabian SWF is a testament of the efforts that some of the Middle Eastern funds are undertaking to spearhead best practices in the region.

Sovereign wealth funds continue to improve their best practices: when we first completed this exercise in 2020, the average score of SWFs globally was 42% (considering the new sustainability elements, applied retroactively). Today it is 53%, even with the entry of new funds that usually present worse results at inception. Sovereigns are improving their transparency dramatically. Sustainability and resilience scores are still below par with 4.0/10 and 2.2/5 respectively, but we believe these will keep rising as funds keep maturing.

Public pension funds continue to display better marks than sovereigns across the board. This year, the governance and resilience elements have stayed constant, but the responsible investment factor has increased significantly. This is mostly due to the introduction of “newer” concepts such as the adherence to best practice frameworks such as TCFD or SASB; and the target of net zero goals. Almost half of the analyzed pension funds have formally committed to net-zero by a specific timeline, most of them within the past two years.