Sovereign Wealth Funds, BRIC and Sustainable Development
Irina Peaucelle
Abstract
Long-term investors, such as sovereign wealth funds (SWFs) and sovereign pension funds (SPF) are 
major players in socially responsible investing. 
This paper makes a comparative analysis of management practices of different funds during the 
current economic crisis. The analysis includes observations of the activities of sovereign funds of Brazil, 
Russia, India and China. The case study shows the different aspects of their performance in terms of the 
guidelines of sustainable development. 
Institutional investors of Brazil are pension funds. The biggest, PREVI, took on responsibilities to invest 
ethically, but they have to manage risks of inflation and demographic long term risks. China and Russia set up 
Sovereign Wealth Funds wanting to consider optimally their sovereign assets and liabilities together with 
macroeconomic reconstruction and global socially responsible investments. India has to determine whether it 
should or not establish a Sovereign Wealth Fund. 
The analyses inform new macro and global economic policy.
ension funds are buffers of accumulated indirect or deferred wages. For this reason their owner is the 
sovereign active working population. During their expansion, pension funds stand out as a gradually separated 
from the employee and later from the worker. A rich economic literature is dedicated to the role of pension funds 
in the formation of a new type of capitalism. For instance, G. Clark (2000) and S. Montagne (2006) analyse the 
way the development, first based on tradition and then on legally established requirements for private and 
employer-sponsored pension funding bodies, becomes a typical system of financial management mechanisms of
accumulation and economic growth. 
The first sovereign wealth fund, the Kuwait Investment Authority, was founded in 1953. However, sovereign 
wealth funds (SWF) began to rapidly evolve in the early 21st century, becoming major players in global finance.
According to a Deutsche Bank statistic (Kern, 2009), in 2008 SWFs were more than twice the size of hedge 
funds, approximately half the size of world gold reserves, and their assets corresponded to 16% of pension funds, but to 70% of public pension reserve funds. The source of the first SWF, as of the majority of later formed 
sovereign funds, is absolute ground rent. 
The theoretical background of the nature of this rent lies in "classical" financial theory that emerged in 
Europe between the 16th and 20th centuries and examined the rules of accumulation, management and use of 
public property. Absolute rent is (see Marx, 1867) an income of a monopolist, the owner of the land and/or 
natural resources, which usually exceeds the income earned by capitalists investing the same amount of capital in 
other economic sectors, where the average rate of return is determined by competition. Since the owner of land 
and natural resources in most countries is the entire population, the absolute rent from their use belongs to the 
entire population, which can democratically create a sovereign fund and manage it according to general interests. 
Often the sovereign state controls the governance of the SWFs. 
The source of state wealth funds can also derive from the activities of state enterprises, the earnings of 
privatisations, the balance of payment surpluses and the revenues arising from fiscal surpluses, including foreign 

exchange reserves of central banks resulting from international operations of public finances. 

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This BLOG  looks at pensions and their impact on what are called Public Private Partnerships or P3’s these are not really about private funding at all but about two streams of public funding, pensions and government with private capital a third partner.
We 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. 
Finally taking the long view we will show how these funds are forms of evolving social capital that is dominating private capital as we evolve into socialization of capital. 
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