Transparency and Disclosure
• Public sponsor or investors. The SIF public sponsor and board are both architects and consumers of the fund’s transparency and disclosure framework. For mixed capital SIFs, the co-investors alongside the public sponsor are also key stakeholders for whom the transparency and disclosure framework of the fund is important. For both the investors and—through the delegated authority structure—the board, the framework provides the information for governance-related decisions on investment and risk management, and provides the intelligence necessary to assess and discipline the SIF’s management and reduce the chances of misconduct (Al-Hassan et al. 2013). Note, however, that commercial investors in the SIF may be reluctant to disclose to the public performance and detailed portfolio information that is commercially sensitive and could affect their competitive positioning.
CORE COMPONENTS OF DISCLOSURE FRAMEWORK AND MECHANISMS OF DISCLOSURE The key principles of high-quality financial and nonfinancial reporting are accuracy, comprehensiveness, comparability, relevance, and frequency (see World Bank 2014). Broadly, a SIF’s transparency and disclosure framework provides (1) key features of the fund, including clarity on the mandate, ownership structure, legal basis, governance architecture, and policies adopted by the SIF, including the remuneration structure of its governing bodies; (2) a list of investments and fund performance with respect to both financial and economic returns; and (3) audited financial statements for the fund. Core elements of the SIF’s disclosure framework are broken down in box 7.6. The main mechanism for both financial and nonfinancial disclosure is a SIF’s annual report, although a SIF usually provides salient information in ancillary documents published on its website (De Belis 2011). Disclosure is not expected to jeopardize the competitive positioning of the SIF, nor should it prove to be overly administratively costly (OECD 2015, 6).20 SIFs commonly report on an annual basis but also may have semiannual or quarterly reporting. The annual report is embraced as a key instrument for public and investor disclosure by both the Santiago Principles and the EU AIFMD.21 Particularly for public capital SIFs, annual reports are publicly accessible on the SIF website, which also typically contains key information on its governance structure, investment policy, responsible investment strategy, or ESG policies. As discussed earlier, ISIF publishes its economic impact report separate from the annual report, on a half yearly basis.22 SIFs also disclose key financial and nonfinancial information through other mechanisms, and communication with the general public and domestic institutions—through seminars, media visibility, or up-to-date web presence— enhances the domestic legitimacy of the SIF.23 Khazanah, for instance, organizes its stakeholder engagement via the media, fund managers, government agencies, civil society organizations, and members of parliament to increase understanding of the SIF (Khazanah Nasional 2019). SIFs generally adopt either global International Financial Reporting Standards (IFRS) or local standards. The IFRS are accounting standards promoted by the International Accounting Standards Board; they provide a common accounting methodology that allows financial statements globally to be comparable.24 Applying global or regional standards provides a point of comparison between the reporting of private and public sector entities and frees
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