Sovereign Wealth Funds and Long-Term Development 
Finance: Risks and Opportunities 

Prepared by the Staff of the World Bank Group for the G20 Investment and Infrastructure 
Working Group, February 2014. These are the views of WBG staff and do not necessarily 
represent those of the Executive Board or the governments which they represent


Growth of SWFs globally 
SWFs have proliferated in the first decade of the 21
st century. 
Balin estimates that 35% of all SWFs were established over the five years leading up to 2008. 
“However, some are far older, investing since the 1960s and 1970s and by now extremely diversified 
(see González Cid, 2008). The Kuwait Investment Authority, for example, the oldest, was created in 
1953, Singapore’s Temasek Holdings in 1970, the Abu Dhabi Investment Authority (ADIA) in 1978. 
Singapore, with a powerful export base but a relatively small economy, was one of the very first in Asia 
to create a fund, establishing Temasek in 1974 and then the Government Investment Corporation of 
Singapore (GIC) in 1981, with the aim of increasing the return on investment of its external surpluses by 
targeting international portfolio investments since the very inception. It was the commodity boom of the 
2000s and the rise of emerging markets economies which boosted the new wave of SWF creation, with 
China, Russia and Dubai creating their own sovereign wealth management institutions.” 

The Future of Philanthropy and Development in the Pursuit of Human Well being

In her Keynote Address at Acumen Fund’s 10^th Anniversary Investor Gathering, Dr Judith Rodin, President of the Rockefeller Foundation, spoke about the demand for ‘a movement that creates a fundamental mindset shift in how society mobilises resources to address our social and environmental challenges’. Acumen Fund has been part of this shift for the past 10 years and, as we at Rockefeller are ourselves approaching a key milestone, our centennial, we continue to push forward on the path of innovation and thinking on mobilising new resources.

It is a particularly timely topic of conversation. In a time of scarce public and philanthropic resources, foundations and developmental institutions must increasingly turn to other forms of support.

Dr Rodin spoke of a number of mechanisms for mobilising new resources, including impact investing and hybrid value chains. One thing she didn’t speak to explicitly, however, was the source of new capital resources.

As greater wealth is being generated in emerging economies, we have been particularly interested in understanding how we can leverage these new national resources and unlock capital outside of traditional donor nations –in particular, harnessing the capital held in developing sovereign wealth funds (SWFs), remittances, pension funds and other local capital sources to invest in local development and impact enterprises which can deliver goods and services to poor and vulnerable populations and contribute to wellbeing.

- See more at: http://www.bellagioinitiative.org/2011/11/sovereign-wealth-funds-unlocking-new-resources/#sthash.slLcDYhN.dpuf

CHILE 

Economic and Social Stabilization Fund

The Economic and Social Stabilization Fund (ESSF) was established on March 6th, 2007 with an initial contribution of US$2.58 billion, much of which (US$ 2.56 billion) was derived from the old Copper Stabilization Fund, which was replaced by the ESSF.

The Economic and Social Stabilization Fund allows financing of fiscal deficits and amortization of public debt. Thus, the ESSF provides fiscal spending stabilization since it reduces its dependency on global business cycles and revenue’s volatility derived from fluctuations of copper price and other sources. For example, budget reductions originated from economic downturns can be financed in part with resources from the ESSF, reducing the need for issuing debt.

According to the Fiscal Responsibility Law, the ESSF receives each year the positive balance resulting from the difference between the effective fiscal surplus and the contributions to the Pension Reserve Fund and to the Central Bank of Chile, discounting the payment of public debt and advances made the year before.

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In this BLOG we will look at pensions and their impact on what are called Public Private Partnerships or P3’s.  IT will also deal with other pension matters, such as Defined Contribution Plans (DC) vs Defined Benefit (DB) PLANS, the weakness in private plans, the need for pension reform in public pensions to have shareholder rights, directorships and ethical investment directives and policies.