7
Transparency and Disclosure
INTRODUCTION This chapter discusses the importance of transparency and disclosure for a strategic investment fund (SIF). It follows the governance framework laid out in chapter 4 and highlights how the principles of transparency and disclosure are exhibited in the fund’s accountability structure, governance arrangements, and reporting arrangements. This chapter also discusses the relatively recent global political and financial context within which transparency and disclosure of both sovereign-owned investment agencies and private capital funds have assumed heightened importance. Transparency and disclosure are twin guiding principles that hold the SIF and its governing bodies accountable while the fund invests public wealth in pursuit of a stated mandate. Transparency is the principle that accepts and encourages scrutiny of, and within, the SIF such that it fortifies the fund’s integrity as an institution. Transparency engenders trust (Rose 2015) and is a precondition to establishing a robust accountability structure (De Belis 2011) because it enables an environment within which the SIF and its governing bodies are answerable to both internal and external stakeholders. Transparency in a SIF strengthens its legitimacy and therefore its ability to endure as an institution regardless of changing political climates.1 Disclosure is the complementary principle, making accessible the information that fosters transparency. Adhering to the principle of disclosure ensures that pertinent financial and nonfinancial information is conveyed accurately, comprehensively, and promptly to (1) governing bodies so they can assess the performance of the fund in compliance with the double bottom line mandate, inform their decision- making, and take corrective actions;2 and (2) key stakeholders to encourage the scrutiny that safeguards the mandate of the SIF.3 The transparency and disclosure framework is therefore embedded into the governance architecture of the SIF and enshrined in its establishment law, regulations, and policies. Together these two principles seek to mitigate and rectify the asymmetry of information inherent within the SIF’s governance framework that arises between the public sponsor (principal) and the fund manager (agent),4 and between the SIF and its external stakeholders. 159
