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| Strategic Investment Funds
• Board members should ideally be compensated on market terms (World Bank 2014). Because compensation is critical to the capacity to select competent board members, it should be competitively set to attract good talent. Restricting executive compensation to public sector pay can undermine the ability to competitively attract talent. Once the board is constructed, the manner in which the board functions and conducts itself is critical to the success of the SIF.31 As discussed earlier, the board must be empowered by the owner(s) to take on its portfolio of key duties (see table 4.4 for a list of key duties). • The SIF board’s primary task is to ensure that the double bottom line objectives are met, and to clarify how to prioritize these objectives especially when TABLE 4.4
SIF board functions
OVERALL BOARD FUNCTION
KEY DUTIES
Supervise SIF mandate
• • • • • • • • • •
Appoint and supervise fund manager
• Dedicated manager. Appoint SIF CEO, and oversee appointment of senior executives. • External manager. If the SIF has a separate fund management company, conduct a competitive section process and appoint the fund manager. • Establish key performance indicators for the fund manager and oversee the performance of the manager.
Establish and periodically review SIF strategy. Approve any material amendments to SIF strategy. Approve the fund’s investment policy, submitted by SIF management / investment committee. Develop selection policies and criteria for solicited and unsolicited proposals. Approve the SIF investment strategy, and oversee its implementation. Supervise the SIF trajectory toward the mandate established by the public sponsor. Clarify the prioritization or approach with respect to meeting the dual objectives. Provide approvals for investments, particularly those exceeding thresholds or risk limits if needed. Oversee SIF representation in the boards of its portfolio companies. Be vigilant in identifying and managing conflicts of interest that may lead the SIF to deviate from mandate. • Appoint subcommittees of the board. • Monitor portfolio performance and compliance with investment policies. • Approve annual budget and expenditure.
Audit and risk management Audit • Instate systems of internal and financial controls, and review and monitor the effectiveness of the systems. • Review and evaluate the internal audit process and outputs. • Select and appoint external auditors. • Review and evaluate outputs received from the external auditor through the audit committee. • Ensure the quality and integrity of the financial statements. • Ensure disclosure of related-party transactions and conflicts of interest. • Review compliance function. • Ensure compliance with accounting, legal, and regulatory requirements. Risk management framework • Articulate risk appetite, and prescribe the risk limits and thresholds for the SIF. • Ensure risks are identified, assessed, managed, and reported. • Ensure policies and procedures for risk management. • Monitor adherence to risk governance. Compensation
• Devise, review, and approve compensation plans (including performance-related pay), policies, and succession plans for employees. • Ensure that compensation structure for employees is consistent with the SIF’s long-term objectives.
Reporting
• Ensure that financial statements and other disclosures clearly present the SIF’s performance. • Report to public sponsor and other SIF investors on the SIF’s performance.a
Source: World Bank 2014 and original research for this publication. Note: CEO = chief executive officer; SIF = strategic investment fund. a. This follows from Principle 5 of the Santiago Principles: “The relevant statistical data pertaining to the SWF should be reported on a timely basis to the owner, or as otherwise required, for inclusion where appropriate in macroeconomic data sets” (IWG 2008, 7).
