The state-backed investors with the best governance, resilience and sustainability

Australia’s Future Fund has scored highest among state-backed investors across the world on “governance, sustainability and resilience”, according to research by data and consulting firm Global SWF.

The 2021 GSR Scoreboard generated 2,500 data points from 100 of the top state-backed global institutional investors – 70 sovereign wealth funds and 30 public pensions – on a range of ESG-linked topics. According to the report, Global SWF’s annual survey has become a “tool of analysis” to better understand how market-leading investors are approaching sustainable investment practices.

Future Fund scored perfectly for the second year in a row. Norway’s NBIM, New Zealand’s NZ Super and Canada’s CDPQ each scored 96 percent. Overall, 36 investors improved their scores from the 2020 survey and 21 stayed the same.

At the other end of the spectrum, 39 funds failed the GSR test for reasons including top management changes, prosecutions for misuse of public funds, and governance crises.

Among the “worst performers” Global SWF found were Middle Eastern funds, which struggled with questions regarding governance and resilience, according to the study. Global SWF reported that the pandemic and low oil prices had “triggered significant withdrawals” from Middle Eastern funds during the past 12 months.

With an average overall score of 78 percent, public pensions scored higher than three other categories of state-related investor: savings (56 percent), strategic (44 percent) and stabilisation funds (43 percent). The survey said pensions are more likely to be transparent with their investment processes and more accountable to stakeholders.

North American investors, among which there are more pension funds than SWFs, had the highest average score among market participants at 75 percent. Although European investors had a higher average marker for sustainability – at 6.6 percent, versus 6.0 percent in North America – resiliency and governance lagged behind. For emerging markets, both Asia and Latin America scored above 50 percent overall.

Larger investors with more mature governance processes tended to score better than smaller and newer investors. Funds with portfolios that were more than 60 percent illiquid struggled, particularly with resiliency issues. Investors allocating 35-60 percent of their portfolios to private markets performed the best.