Columbia International Affairs Online: Working Papers

CIAO DATE: 06/2010

Sovereign Wealth Funds and the Santiago Principles: Where Do They Stand?

Sven Behrendt

May 2010

Carnegie Endowment for International Peace


Sovereign wealth funds (SWFs) have become dominant players in global finance and world affairs, controlling considerable financial assets. Their investment behavior continues to resonate across the world economy and their increasingly extroverted investment policy prompted a political backlash in mature economies. Reacting to this backlash, in October 2008 a group of 26 SWFs committed themselves to transparency, good governance, and accountability standards by signing a voluntary code of principles, the “Generally Accepted Principles and Practices,” for SWFs (GAAP), also known as the “Santiago Principles.” Some eighteen months after the publication of the Santiago Principles, their implementation is highly uneven. A small group of SWFs, predominantly from democratic countries, shows a high degree of commitment to the principles. A second group shows partial implementation, and a third group, mainly from the Gulf Arab region, has yet to reach satisfactory implementation levels. The Santiago Principles and the commitment of their sponsors—some of the biggest SWFs—are an important test for the viability of new forms of global governance. However, their sluggish implementation risks devaluing the Principles, thereby increasing SWFs’ political risk exposure.