Sovereign Wealth Funds (SWFs) play a crucial role in managing national wealth, ensuring long-term economic stability, and generating financial returns. With over $11 trillion in global assets under management (Global SWF, 2024), their influence extends across global markets. However, ensuring effective governance and transparency remains a priority to maintain public trust and operational efficiency.
Elsa Satkunasingam, Senior Business Development Advisor for Corporate and Sustainability Governance at the Asia School of Business (ASB), shares key insights into the evolving landscape of SWFs, emphasizing the importance of governance, investment strategies, and sustainability alignment.
Governance and transparency are essential safeguards against financial mismanagement and political interference. “Clear governance processes ensure that SWFs effectively manage national wealth for both current and future generations,” says Satkunasingam. “Without these measures, SWFs risk losing public confidence, which is vital for long-term success.”
Recent evaluations highlight varying levels of governance and transparency among SWFs. According to Global Sovereign Wealth Fund (Global SWF) rankings, Singapore’s GIC received mid-range scores, while Malaysia’s Khazanah Nasional has demonstrated marked improvement since 2021. Indonesia’s INA, alongside these funds, continues to enhance its governance by improving board selection disclosures, sustainability strategies, and crisis-prevention frameworks. “The improvements we see are encouraging, but there is still room for SWFs to increase transparency and accountability,” she adds.
Khazanah Nasional and Singapore’s Temasek Holdings exemplify strong SWF management by balancing financial returns with socioeconomic development. They operate across domestic and international markets while maintaining independence, accountability, and alignment with their investment mandates. Notably, Temasek has been recognized for its high level of transparency. “Khazanah and Temasek are strong examples of how SWFs can remain independent while contributing to national development,” says Satkunasingam.
Maintaining public trust is crucial for SWFs, as they are ultimately responsible for managing national wealth. “Transparent and accountable governance structures are necessary to protect against financial mismanagement and political interference,” says Satkunasingam. “A well-governed SWF ensures that investment decisions are made based on financial viability rather than political influence.”
One of the primary challenges for SWFs is striking a balance between domestic investments and international diversification. While international investments help mitigate domestic risks and enhance portfolio returns, SWFs must also contribute to local socioeconomic development. “Diversification is necessary, but SWFs must also align their strategies with national economic priorities,” says Satkunasingam.
Emerging technologies like artificial intelligence (AI) and blockchain are reshaping the investment landscape. Norway’s SWF, for instance, employs AI to optimize capital deployment, reducing trading costs and improving decision-making efficiency. At the International Forum of Sovereign Wealth Funds (IFSWF) in November 2024, members agreed to integrate AI into their investment strategies. “AI allows SWFs to analyze vast amounts of unstructured data quickly, detect emerging trends, and enhance transparency,” explains Satkunasingam. “This helps in identifying ESG risks, conflicts of interest, and ensuring more responsible investing.”
SWFs are increasingly incorporating Environmental, Social, and Governance (ESG) principles into their investment strategies, recognizing the long-term economic risks posed by climate change. “There is a natural alignment between SWFs and sustainability goals, particularly in addressing climate-related risks,” says Satkunasingam. Although recent uncertainties, such as investor exits from the Net-Zero Asset Managers (NZAM) initiative, have created challenges, maintaining a steady ESG commitment is critical for resilience and long-term profitability. “Climate-related risks will only intensify, making ESG integration a non-negotiable strategy for SWFs,” she emphasizes.
With the launch of the Sarawak Sovereign Wealth Future Fund (SSWFF), maintaining independence from political influence is paramount. Satkunasingam suggests key protective measures, including legal frameworks to shield the Board of Guardians and senior management from external pressure, holding leadership accountable for fund management, and launching public awareness initiatives to enhance transparency. “A robust governance framework will be critical to ensuring that Sarawak’s SWF remains independent and achieves its long-term financial and economic objectives,” she advises.
As SWFs navigate an evolving financial landscape, governance, transparency, and sustainability remain at the forefront of their success. By adopting best practices, leveraging emerging technologies, and maintaining strong ethical standards, SWFs can fulfill their mandate of safeguarding national wealth while driving sustainable economic growth.
With institutions like the Asia School of Business contributing to the discourse, the future of SWFs in Asia appears poised for greater accountability and strategic advancement.
