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Sovereign Wealth Funds and Ethical Investing: The Norwegian Model

Angela Cummine
University of Oxford
Angela Cummine
University of Oxford
Open Panel

Abstract

A recent argument regarding Global Injustice advanced by philosopher Leif Wenar holds that our present system of global commerce is characterised by theft. This theft violates the property rights of some of the world’s poorest people who live in resource rich countries. The violation occurs in two stages: first, a corrupt sovereign steals directly from his own people by monopolising profit from domestic natural resources; second, foreign governments who trade with these regimes acquiesce in this theft through purchase of the stolen raw materials and their by-products. Proceeds from this crime funnel directly back to corrupt rulers, exacerbating what is known as the ‘resource curse’, a paradoxical situation where the citizens of resource rich countries remain extremely poor despite the promise of prosperity from abundant natural wealth. From Wenar’s perspective, the cause of the resource curse ‘is not in nature, but in human institutions, here specifically markets.’ If so, then any attempt to tackle the resource curse must involve identifying institutions for the enforcement of property rights of the resource robbed. Curiously, Wenar’s discussion made no mention of a recent institutional development in the international economy with such potential. Over fifty countries worldwide now possess a Sovereign Wealth Fund (SWF), an investment fund owned by states that invests public assets in private financial markets overseas according to the sovereign sponsor’s objectives. The majority of these domestic funds derive their wealth from trade in natural resources. This paper will argue that any theorist interested in protecting property rights to resource wealth must scrutinize SWFs for their potential as enforcement mechanisms, given their increasingly prolific use by sovereigns to hold and invest such capital. In particular, it will consider the model of ethical investing developed by the Norwegian SWF as a best practice model for global investment justice.