Sovereign wealth funds could insulate themselves from growing governance concerns by signing up to a new plan being touted by the World Bank’s private-sector arm to channel investment into Africa.
International Finance Corporation chief Lars Thunnel said that a recently proposed IFC “fund of funds” for mobilizing capital into African markets would give a boost to state investors by bringing to bear an IFC-backed governance framework – known as the Equator Principles - for sustainable investment.
“We use these structures for everybody that we do business with – the benefits for sovereign wealth funds are that they can say they are doing it together with us,” Thunnel told Emerging Markets. “If people do have a concern about governance issues they will be less concerned: a stand for transparency is a good thing.”
His comments come as the debate over sovereign investor transparency continues to ratchet up across western capitals. Proposals for a voluntary code of conduct for state funds have come under attack by leading sovereign investors, including Kuwait and China.
But Thunnel said he was in talks with sovereign wealth funds as well as charitable foundations about possible roles they could play in developmental funding in Africa.
“[We want] to let them participate in our programme where we help fund managers in Africa to create new entities in poorer parts,” said Thunell.
He said he envisaged the IFC’s role as a convening partner bringing together disparate groups. He added that the IFC is also discussing the proposal with “syndicating partners”, or other big-ticket investors.
His comments follow an appeal last month by World Bank president Robert Zoellick for state funds to channel 1% of their roughly $3 trillion proceeds into equity in Africa.
AfDB president Donald Kaberuka told Emerging Markets that while he hoped that sovereign wealth funds could be stimulated to invest more in Africa, a coordinated arrangement of investment was needed.
“We need to have an agreement among traditional and emerging donors on the division of labour, and how we can complement each other, especially in agriculture, HIV Aids, health and education,” said Kaberuka.
The Gates Foundation is also seen as a potentially important partner as it is focused on healthcare in Africa and the demands are huge – up to $30 billion is needed in the next 30 years for healthcare.
The IFC is implementing a plan to train banks in financing for healthcare work. “This will include setting up our own investment company to do equity investments in healthcare education and financing,” said Thunell.