Sovereign investors up their game in terms of best practice

Sovereign investors are improving their governance, sustainability and resilience (GSR) practices, while overall investment activities and assets under management have reached new peaks in 2024.

This is according to the GSR Scoreboard, which assesses annually the GSR practices and efforts of the world’s major state-owned investors (SOIs), including sovereign wealth funds (SWFs) and public pension funds (PPFs). It is produced by research firm Global SWF.

The 2024 GSR Scoreboard saw a slight increase in the overall score across funds from 60% in 2023 to 61%. This year, the system was modified to incorporate contemporaneous elements around sustainability, such as adherence to frameworks and commitment to net-zero.

“The improvement has been similar among sovereign and pension funds; and especially around sustainability, as funds are increasing their impact activities and commitments, and reporting them in a regular and meaningful way,” Global SWF said in its recap of the results.

“Sovereigns are improving their transparency dramatically. Sustainability and resilience scores are still below par but we believe these will keep rising as funds keep maturing.”

The scoring is based on 25 different elements, 10 related to governance, 10 to sustainability and five to resilience.

Five out of the 200 institutions achieved a perfect score: Canada’s CDPQ and BCI, Ireland’s ISIF, Singapore’s Temasek and NZ Super.

The Middle East as a region continues to improve, with progress led by Saudi Arabia’s PIF (96% in 2024) and Abu Dhabi’s Mubadala (92%). 

There continues to be a positive and strong correlation between best practices and the financial performance of sovereign investors in the long run, according to the report.

PPFs continue to display better marks than sovereigns across the board. In 2024, the governance and resilience elements have stayed constant, but the responsible investment factor has increased significantly.

The report also includes a market update for the first half of 2024. Financial markets continue to improve, which has translated into new historical peaks for both SWFs ($12 trillion) and PPFs ($24 trillion) in terms of assets under management. Investment activity is picking up: $96.1 billion in 236 transactions, with the average deal size increasing to $410 million.

Going forward, geopolitics and market uncertainty remain key concerns, but Global SWF expects rising activity and number of funds and offices.