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| Strategic Investment Funds
GLOBAL TRANSPARENCY AND DISCLOSURE REQUIREMENTS Transparency and disclosure requirements have increased globally over the past decade for all forms of investment funds and sovereign agencies. This trend has been driven by multiple factors, including higher standards of public accountability; increased investor expectations for responsible investment and environmental, social, and governance (ESG) disclosure; and changing global standards and regulatory norms. Transparency requirements for sovereign-owned investment agencies in general came into sharp focus before the global financial crisis, when wariness of foreign state capitalism5 amplified protectionist sentiments in developed countries like the United States. Protectionist sentiments were awakened in the United States when investments by sovereign-controlled foreign entities triggered worries about the risk of foreign access to industries, intellectual property, and technologies of national security importance (Jackson 2019). These concerns resulted in the enactment of a new law, the Foreign Investment and National Security Act of 2007, enlarging the scope of the interagency Committee on Foreign Investment in the United States to review investments by foreign entities in US assets. In addition, the 2008 global financial crisis highlighted the possibility of “a redistribution of financial and political capital” in the global landscape through the investment activity of Middle East and Asian sovereign wealth funds (SWFs) (Monk 2009, 1; emphasis in original). Several of these SWFs, for instance, rescued flailing US financial assets in a series of high-profile Wall Street investments in Morgan Stanley, Citigroup, and Merrill Lynch in the immediate aftermath of the crisis.6 Although these investments delivered much-needed capital to the struggling banks, they also magnified protectionist concerns about the underlying motivations of foreign state-owned agencies taking stakes in US companies.7 In 2018, continuing political concerns in the United States resulted in the enactment of the Foreign Investment Risk Review Modernization Act of 2018, which further broadened the purview of the Committee on Foreign Investment in the United States.8 Note that such preemptive moves have not been restricted to the United States or developed countries. A more recent echo of a sovereign’s protectionist move against incursions by foreign state-sponsored capitalists, for instance, was seen in the immediate aftermath of the COVID-19 (coronavirus) pandemic when the government of India effectively tightened investment from China in April 2020 by eliminating the automatic foreign direct investment route for countries with which it shared a land border.9 Partly to preempt a wave of protectionist moves targeting SWFs in the aftermath of the global financial crisis, the International Monetary Fund spearheaded the 2008 Santiago Principles through an International Working Group of SWFs focused on establishing a set of voluntary transparency-oriented provisions for these funds (see IWG 2008). The dominant thrust of the Santiago Principles was to provide greater transparency on the structure and operations of SWFs to allay protectionist worries in investment-receiving countries. These principles are also in line with an increasing dedication of global resources to establishing transparency standards—such as on fiscal transparency, monetary and financial policies, or corporate governance—within the international financial architecture.10 Endorsed by over 20 countries at the time, the 24 principles aimed to agree on higher standards and methodologies for transparency, even if these standards were self-applied, not legally binding, and had to be customized to work in vastly different
