As sovereign wealth funds (SWFs) manage over US$11 trillion in global assets, governance and transparency are essential safeguards against malfeasance and are crucial for building and maintaining public trust, Asia School of Business Senior Business Development Advisor for Corporate and Sustainability Governance Elsa Satkunasingam said.
She highlighted that SWFs play a vital role in ensuring economic stability and wealth creation by making strategic investments that safeguard prosperity for both current and future generations.
“As such, transparent and accountable governance structures are necessary to protect against financial mismanagement and political interference.
“Additionally, clear governance processes help ensure SWFs fulfil their responsibility to manage national wealth for current and future generations effectively,” Elsa said in an exclusive email interview with BusinessToday while pointing out that public confidence hinges on the professionalism and independence of SWF management.
Commenting on the launch of Sarawak Sovereign Wealth Future Fund (SSWFF), Elsa said protective measures such as enacting laws to shield the Board of Guardians and senior management from coercion, holding them accountable if they mishandle funds and launching public awareness initiatives to keep leadership accountable to the fund’s objectives can help SSWFF to maintain its independence and protect against political pressure.
In terms of challenges, Elsa shared that SWFs face the challenge of balancing domestic investments with international diversification.
“Diversification enhances portfolio returns and mitigates domestic risks, but prioritising socioeconomic development through domestic investment is also critical.
“For this, Khazanah Nasional Bhd and Temasek Holdings Ltd balance investments for financial returns with contributions to socioeconomic development by operating across domestic and international markets to foster economic growth while maintaining independence, accountability, and adherence to their investment objectives,” Elsa said, adding that SWFs can leverage emerging technologies like artificial intelligence (AI) and blockchain to enhance transparency and improve investment decision-making in 2025.
“AI enables investors to process large, less structured and complex datasets, and provide insights that previously took much longer to process.
“At the same time, it also helps SWFs to detect emerging trends quickly and it also increases transparency as conflicts of interest, or environmental, social, and governance tracking in their investment portfolios can be identified,” she said.
Originally published by Business Today.