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Sustainable Investment: Sovereign Wealth Funds and Long-Term Investment

Started: 
Wednesday, September 1, 2010

The Committee on Global Thought’s research into sustainable investment fosters collaboration between scholars, managers from long-term investors and sovereign wealth funds, and policy makers to develop investment strategies and institutions that promote financial stability, environmental sustainability, and equitable development. This project aims to bridge information gaps between academic research and sovereign wealth fund (SWF) managers about long-term investing in short-term oriented markets, and to develop strategies and institutions to facilitate long-term investment. 

The countercyclical investment strategies used by some SWFs during the financial crisis demonstrated that these state-owned investment funds can act to mitigate risk and promote stabile financial markets. With over four million dollars in assets under management, these funds could also address funding gaps in retrofitting the global economy for a greener future. 

This project aims to bridge information gaps between academic research and sovereign wealth fund (SWF) managers about long-term investing in short-term oriented markets, and to develop strategies and institutions to facilitate long-term investment. 

In order for SWFs and similar long-term funds to effectively address these challenges, further analysis and inquiry is required. One component of this project investigates institutional obstacles to long-term investments that confront global challenges. A survey of senior management at SWFs, pension funds, development banks and private equity firms designed by CGT Researcher Rachel Harvey, Professor Patrick Bolton, Frederic Samama (Amundi Asset Management) and Economics Ph.D. candidates Laurence Wilse-Samson and Li An explores the range of regulatory, organizational and investment climate factors that constrain investors. Additional research by Bolton and Samama proposes new financial tools to incentivize long-term investment.

A second component of the project seeks to confront obstacles to that have prevented SWFs from taking large stakes in infrastructure and real estate investments. Adjunct Associate Professor Sanjay Peters, Professor Patrick Bolton, Professor Joseph E. Stiglitz, and Rabah Arezki (IMF) seek to address this challenge through the establishment of an infrastructure investment platform that would encourage very large funds from the Gulf region and Asia to contribute to development while taking advantage of growth opportunities in Africa. Discussion of implementation of this platform will be the subject of an intensive conference at the Rockefeller Foundation’s Bellagio Center. Similarly, working sessions of highest-level SWF managers have been held to discuss the possibility of establishing a joint platform for making green investments. Other work by Bolton, Samama and Professor Roger Guesnerie (Collège de France) explores the establishment of an international green fund. 

Annual conferences have been held since 2010 with the goal of generating greater exchange between academics, practitioners and policy makers. Most recently, “Long-Term Investing in a Changing World” was held in Singapore at Singapore Management University. Topics included discussions of the market of investing in industry and infrastructure, the strategic allocation of sovereign wealth, inflation-protected securities, and a discussion of governance issues. The discussions of the inaugural conference “A New Global Capitalism,” held at Columbia University in 2010, were disseminated in the volume Sovereign Wealth Funds and Long-Term Investing (Columbia University Press, 2011), edited by Bolton, Samama and Stiglitz.

Support for CGT’s Sustainable Investment project has been generously provided by the Europlace Institut de Finance, the Rockefeller Foundation and the Center for Global and Economic Governance at Columbia University.  

 
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PRINCIPAL INVESTIGATORS

Barbara and David Zalaznick Professor of BusinessProfessor of Economics
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