Sovereign Wealth Funds work with the IMF on code of conduct
The International Monetary Fund (IMF) has been meeting with Sovereign Wealth Funds (SWF) to develop a non binding code of conduct for the funds to agree to operate under. The intention of the IMF is to facilitate the development of a code in order to bring about some financial stability in the currently turbulent market. Sovereign wealth funds control an estimated $3 trillion in assets which gives them enormous investment capacity and influence in the market. In absence of a code of conduct, the funds have found themselves in the middle of a hot debate about regulation and transparency on a national and global basis.
World leaders have raised concerns about the increased investment activity by SWF’s. At the peak of the credit crisis SWF’s became very active in new investments. On numerous accounts they came to the rescue to inject funds into foreign financial institutions close to collapse. Other new investments included placing funds in private equity investments, a practice never seen before. It became apparent in the midst of this activity, that relatively little is known about individual SWF’s and their investment intentions. In response to this revelation, individual countries across the globe began to consider regulation to curb SWF investments, particularly in the area of sensitive investments such as defense and energy. Some SWF believe developing a code with the IMF will satisfy individual nations and avoid intentions to regulate.
UNI Global Union has been actively involved in drawing global attention to the lack of transparency of alternative asset classes such as private equity, hedge funds and SWF’s. Unions across the globe have been meeting and negotiating with private equity firms to develop codes of conduct which include fundamental labour rights for workers in portfolio companies and increased access to information on investment operations. UNI supports the concept of such a code for sovereign funds, many of whom are now invested in private equity funds. It would be a great achievement if SWF come out in support of core labour standards for workers in their investment portfolio.
Negotiations continue with the SWF’s and the IMF, however the IMF does not believe the code will be ready by their expected October deadline. SWF are working with the IMF with the intention that the code will deliver access to the world market on fair terms, however some funds believe the code will restrict their operational capacity.