The Role of Sovereign and Strategic Investment Funds in the Low‑carbon Transition

5. How sovereign funds and SIFs can play a stronger role in the low-carbon transition

This section discusses the causes of sovereign funds’ and SIFs’ limited engagement with climate finance, and how barriers to engagement can be addressed for sovereign funds and SIFs to play a stronger role in the low-carbon transition. Sovereign funds and SIFs can also complement each other when seeking climate alignment. The section first considers sovereign funds, then SIFs, then the potential for synergies between these two types of state-sponsored investment funds.

Sovereign funds

The reforms required for sovereign funds to play a stronger role in the low-carbon transition are in part incumbent on governments that own sovereign funds; in part they concern sovereign funds themselves, and the role of their boards and management. Finally, some reforms relate to the role of sovereign funds’ asset managers, advisers and other service providers.

Policy, mandate and strategy

Generally, sovereign funds’ mandates emphasise the funds’ fiduciary responsibility to the state and its citizens. The mandates stress sovereign funds’ obligation to invest on commercial terms, seeking to maximise risk-adjusted returns. Sovereign funds’ role as commercial investors is also enshrined in the Santiago Principles, and this unity of focus provides the funds’ boards and management with clarity of objectives. If there is a real or perceived trade-off between a sovereign fund’s fiduciary responsibility and climate considerations, the sovereign fund’s board and management are then likely to prioritise the fiduciary responsibility. Sovereign funds’ climate strategies therefore need to be consistent with their fiduciary responsibilities.

Sovereign funds implement the mandate given to them by their government owner, and are unlikely to alter their modus operandi on climate unless instructed to do so by their government. A decision to align a sovereign fund’s activities with the low-carbon transition is therefore a political decision, rather than a technical one. Governments that wish their sovereign funds to align with the low-carbon transition therefore need to provide the fund with the foundations to do so. Governments can do this by establishing investment beliefs for their sovereign fund that are aligned with climate risk and climate impact. Arguably, governments could also include climate alignment in their sovereign fund’s mandate, while retaining the characteristics of the sovereign fund as a commercial, profit-maximising investor organisation.

Sovereign fund boards could request fund management to define a strategy for climate alignment, based on the investment beliefs established by the government. The board could also ensure clarity in fund governance with regard to responsibilities for implementing alignment (Caldecott and Harnett, n.d.[13]).

Costs of climate alignment

Even when it makes financial sense, the integration of climate considerations has costs. These costs include those arising from training of staff, investments in new capabilities that the sovereign funds cannot easily build with current staffing, as well as the upgrading of governance structures, strategy, risk management, and other procedures. There are also recurrent costs, such as those associated with engaging with asset managers and portfolio companies on climate-related issues, costs of analysing portfolio companies’ carbon footprint, and costs arising from additional efforts to implement climate-related reporting and disclosure. If a sovereign fund’s climate alignment is underfunded, and incentives for management and staff are based on financial performance only, these additional activities may be perceived as onerous by the fund’s board, management and investment teams. Governments that wish to climate-align their funds need to allow them the budgetary leeway to implement reforms.

Capability, governance and skills

In a survey of 22 leading asset owners, the Asset Owners Disclosure Project (Asset Owners Disclosure Project, 2018[23]) finds that successful climate strategies are underpinned by strong climate-related governance, and “buy-in” from trustees and senior management. Climate alignment requires clarity of responsibilities for climate-related issues at board and management level, as outlined in the recommendations of the TCFD, and overall climate-aligned governance. Few sovereign funds yet have this.

Climate alignment and “greenfield” infrastructure investment requires sector-specific skills and knowledge, not only in the area of finance but also in engineering. The very low share of low-carbon assets in sovereign fund portfolios is likely to be related to skills gaps in the areas of infrastructure investment and low-carbon technology. In fact, few sovereign funds possess these types of skills. While sovereign funds have diversified portfolios and objectives, funds that seek to undertake direct investment in low-carbon infrastructure need to build or acquire this capacity.

For large sovereign funds it may be viable to procure an existing infrastructure-focused asset manager that already has a track record. For sovereign funds that seek to increase their exposure to listed “green” infrastructure, or to invest in infrastructure-focused private equity funds, capacity requirements are lower than for direct investment (McKinsey&Company, 2016[31]). These funds will nonetheless need the staff and management capabilities required to understand the infrastructure sectors in which they will be investing. For sovereign funds that already invest in private markets, the skills acquired in these markets may be deployed for green investments (Capape, 2017[4]).

Climate-aligned engagement with portfolio companies also requires skills and resources. Among sovereign funds, Norway’s NBIM has been a leader in building this type of capabilities. The use of climate criteria for the selection, monitoring and evaluation of asset managers requires capabilities that most sovereign funds have not yet developed.

Governments that seek to climate align their sovereign funds may request the sovereign fund’s board and management to elaborate a plan and a budget for capacity building, consistent with the fund’s climate strategy. Where needed, they could seek the support of external advisors. For investment in greenfield clean-energy infrastructure, the experience of Masdar suggests that expertise, but also strategy and partnerships are core elements that sovereign funds and their governments need to consider (Box 5).

Leveraging partnerships

While developing in-house capacity to operate as climate-aligned investors, sovereign funds can seek to bridge capability gaps through partnerships with organisations that have relevant complementary capabilities. Such partners may include service providers, equity investors, lenders, industry regulators and industry associations. Partnerships have been a core component of Masdar’s strategy to develop the capabilities required for investing in greenfield clean-energy infrastructure (Box 5).

Box 5. Masdar’s top three priorities for sovereign funds that consider investing in greenfield clean-energy infrastructure

Masdar sees strategy, expertise and partners as the three top priorities for sovereign funds that seek to invest in greenfield clean-energy infrastructure.

• Strategy: Sovereign funds need to determine their strategy-and-return expectations early on. They need to define and understand their own competitive advantage, while tailoring business and operating models to maximise returns.

• Expertise: It is critical to recruit and retain the right talent, while utilising external service providers to deliver for those parts of the business that are more commoditised. It is also vital to incentivise staff properly to deliver – especially investment managers. Masdar has benefited from being a specialist investor: as it invests only in renewables and sustainable real estate, it can focus on recruiting in-house expertise to target those sectors. To mitigate the risk of knowledge erosion due to employee turnover, Masdar cultivates human capital. It prioritises the employment of young graduates, particularly United Arab Emirates (UAE) nationals, and seeks to fast-track their development.

• Partners: It is crucial to select partners that add value; you need to build an extensive network among suppliers, equity investors, lenders, regulators, industry associations, and other potential partners. Rather than expanding prematurely, and risk overreaching, leverage partnerships to get to where you want to be.

Source: Mohamed Jameel Al Ramahi, Chief Executive Officer of Masdar.

Concerns about returns

A frequent concern for institutional investors that seek to climate align their portfolios is whether this is compatible with their fiduciary duty to maximise returns (Asset Owners Disclosure Project, 2018[27]), 2018a, (Capape, 2017[4]). Sovereign funds’ commercial orientation does not necessarily preclude the funds from playing a role as instruments of climate policy. There is a growing body of evidence that climate-aligned investment generates competitive returns. For example, one study finds that long-term passive investors such as sovereign funds may hedge climate risk without sacrificing financial returns. Sovereign funds can do this by investing in a decarbonised index based on a standard benchmark, such as the Standard & Poor’s 500 index, while minimising the tracking error with respect to the underlying benchmark. The authors note that decarbonised indices have so far matched or even outperformed benchmark indices, because financial markets still tend to under-price carbon risk (Andersson, Bolton and Samama, 2016[32]). Another study (IEA and Imperial College, 2020) finds that renewable power outperforms fossil fuels in US and European markets. The study found that clean power stocks generated higher returns than stocks in fossil fuel companies over the past ten years, five years, and one year. Whereas US renewable power stocks generated an average annual return of 11.4% from 2010 to 2019, fossil fuel stocks had an average return of 7% during the same period. (International Energy Agency and Imperial College Business School, Centre for Climate and Investment, 2020[33]). A third study, by data provider Morningstar, finds that the six out of ten sustainable funds delivered higher returns than equivalent conventional funds over the past decade, and weather downturns better (Riding, n.d.[34])).

A recent assessment of the world’s largest 100 pension funds finds that the most climate-aligned funds have 6% allocation to low-carbon solutions (Asset Owners Disclosure Project, 2018[27]). This indicates that it is possible for institutional investors, including sovereign funds, to increase their allocation to low-carbon, without compromising returns.

Incorporation of climate alignment into external management contracts and incentives

In theory, sovereign funds would be able to establish a set of incentives for asset managers to act as long-term investors, and consistently with the financial, climate, and ESG objectives of the fund. In practice, sovereign funds and other institutional investors assess managers largely based on quarterly results, and it has proved challenging to define management contract terms that incentivise investment with a long-term horizon. In addition to having different time horizons, asset managers and asset owners also have different perceptions of the importance of environmental issues. Research shows that, given the case of a profitable company whose activities are damaging the environment, only 19% of asset managers would pull their money out, whereas 38% of asset owners would do so (Schroders, 2016[35]) (Capape, 2017[4]).

Sovereign funds should seek to select, monitor and evaluate asset managers based on defined climate-related criteria, and could establish carbon reduction targets for asset managers. To enhance the climate performance of asset managers, climate-conscious sovereign funds should seek to provide asset managers with incentives for capital allocation to well performing low-carbon, long-term assets. For sovereign funds to exercise effective oversight of asset managers’ climate performance, these asset managers must be transparent about climate-related aspects of their management practices. However, asset managers frequently apply a “black box” policy, by considering as proprietary knowledge their climate-related procedures and performance indicators for managing portfolio companies. Asset managers do not necessarily share their methodologies with asset owners such as sovereign funds.

Perceptions of lack of low-carbon investment opportunities

Amongst investors, a frequently cited reason for limited climate engagement is a perceived lack of low-carbon investment opportunities. This perceived lack of opportunities reflects a “static” view of carbon-related aspects of portfolio management, as well as insufficient investor capability to develop new low-carbon assets – particularly in the infrastructure sectors.

First, sovereign funds’ climate performance should be assessed not only “statically”, based on the share of low-carbon assets in their portfolio, but also “dynamically”, based on the emissions reduction of firms in the portfolio. If sovereign funds see companies with potential for emissions reduction as low-carbon investment opportunities, then there should be no lack of such opportunities. Sovereign funds could then exercise climate-aligned active ownership of companies, and pursue portfolio-wide targets for emissions reduction. The implementation of such targets by sovereign funds should include the definition of clear expectations for portfolio companies, with regard to climate-related risk as well as impact; active engagement with these companies; as well as the integration of climate risk management into company and asset valuations (Caldecott and Harnett, n.d.[13]).

Second, in the infrastructure sectors there is strong demand for operating assets. However, high risk at the development and construction stages has kept this demand from translating into additional projects. In other words, new infrastructure has a low price-elasticity of supply. With private investors competing for operational infrastructure assets and pushing up the price of these assets, sovereign funds’ investment in operational infrastructure would make little difference to climate finance beyond contributing to a further increase in the price of the assets.

The example of Masdar and of Canadian pension funds (Boxes 2 and 3), shows that it is feasible for an institutional investor such as a sovereign fund to develop new infrastructure projects. To gain access to new low-carbon infrastructure assets, sovereign funds could establish or invest in project development companies such as Masdar, they could set up infrastructure investment platforms jointly with other institutional investors, or they could in-source their direct investment management functions for infrastructure. Several large institutional investors have in-sourced investment management, thereby not only strengthening their capacity to invest in long-term assets such as infrastructure, but also eliminating management fees (Singh Bachher, Dixon and Monk, 2017[11]).

Lack of reliable climate-related data

A main challenge when seeking to assess sovereign funds’ climate-related activities is the scarcity of publicly available information. Sovereign fund transaction databases, such as that of the Sovereign Wealth Fund Institute (SWFI), do not include data on climate-related aspects of deals – which sovereign funds in any case generally do not report. Transaction level analysis therefore has to be undertaken in an ad-hoc manner, based on criteria for climate relevance that are not used by sovereign funds themselves in their reporting (OECD, 2016[36]).

Scarcity of climate-related information is a challenge not only with regard to sovereign fund transactions, but also with respect to their internal processes. According to the Asset Owners Disclosure Project, only eight sovereign funds currently disclose publicly their strategies on climate change. Of these eight, only three are based in emerging markets and developing economies. Furthermore, with the exception of Azerbaijan, Norway and UAE, asset owners in fossil fuel producing countries, including sovereign funds, “consistently rank lowest for climate risk disclosure” (Asset Owners Disclosure Project, 2018[37]). Finally, among the more than 1 000 organisations that support the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), including some of the world’s largest investment banks, insurance companies, asset managers and institutional investors, there are only two sovereign funds – the New Zealand Superannuation Fund and Norway’s GPFG.

The lack of available information is compounded by relatively lax financial reporting requirements in many emerging markets; by joint deals in private markets where a sovereign fund is one of several investors, and due to the challenges of tracing sovereign fund capital that is invested through third-party asset managers (Capape, 2017[4]). A minority of sovereign funds, such as Norway’s GPFG and the New Zealand Superannuation Fund, operate with a high level of transparency.

The lack of climate-related reporting by sovereign funds mirrors insufficiencies in climate-related reporting by portfolio companies. Although many companies have made progress on climate-related disclosure and reporting, the information published by most companies on climate risk and climate impact remains insufficient for investors to take informed decisions (Task Force on Climate-Related Financial Disclosures, 2019[38]).

There are several reasons for sovereign funds’ general reluctance to publish information on their practices and transactions, including climate-related aspects. Many sovereign funds consider, like other commercial investors, that their investment practices and decisions are reflective of proprietary knowledge and skills. They may see transparency coming at a cost, since information revealed may be of use to competitors. Nonetheless, increased transparency is in principle no less achievable to sovereign funds than to the numerous other large investment organisations that have chosen to join the TCFD. To start a process towards climate alignment of sovereign funds, governments could instruct their sovereign funds to join other major financial institutions in reporting according to the recommendations of the TCFD. Sovereign funds that remain uncomfortable with disaggregated public reporting on their activities could, at second best, report publicly on aggregate low-carbon investments, while reserving the full reporting for their government owners (Capape, 2017[4]).

Sovereign funds could in turn drive visibility on climate-related information by requesting their asset managers and portfolio firms to adhere to the recommendations of the TCFD. In particular, in private markets, which are frequently opaque, sovereign funds could have an important role in driving visibility on climate-related variables. In the last instance, sovereign funds could divest from firms that, after sustained engagement, refuse to pursue disclosure standards consistent with the recommendations of the TCFD. In an analogy to financial reporting, few investors would hesitate to divest from a company that does not publish financial statements consistent with the International Financial Reporting Standards (IFRS) or other accepted accounting standards.

Cultural obstacles and lack of incentives

Many investors or trustees regard climate change as an ethical or political issue rather than a financial one (Asset Owners Disclosure Project, 2018[23]). To overcome this kind of obstacle, sovereign funds may need to offer board members, managers, and staff training on climate risk, climate impact and climate-aligned investment practices.

A lack of incentives for climate-related performance, at the board, management, and staff level, is likely to be an important cause of sovereign funds’ inaction on climate. Governments may need to establish incentive structures for fund management that are consistent with climate objectives, or mandate the fund’s board to establish such incentive structures.

Regulatory environment and other external factors

Sovereign funds’ climate-related engagement is affected by external factors that have a broad impact on investors, such as a lack of momentum in climate-relevant regulation and policy, unstable infrastructure and clean-energy investment regimes, and the unpredictability of investing in fast-evolving technology sectors. In emerging markets, investment may be further complicated by weak rule of law, lack of information for due diligence, currency risk and political risk. Emerging markets may provide attractive opportunities in terms of returns, portfolio diversification and climate impact, yet these markets require the investor to be able to accept and mitigate the associated higher risk.

Few national regulators have so far integrated climate-related disclosure and reporting broadly into their national regulatory frameworks. Such reporting and disclosure is therefore still largely voluntary. This includes, for example, the recommendations of the TCFD, as well as the recently approved EU Taxonomy and the EU Green Bonds Index (see discussion in Box 6 below). The incorporation of relevant voluntary frameworks into national regulation, in particular the recommendations of the TCFD and the Taxonomy, would have an important effect on sovereign funds’ climate-related disclosure and reporting.

Given their size, influence and connection to government, sovereign funds could provide crucial support for the development of climate-related financial regulations. (Asset Owners Disclosure Project, 2018[23]) (2018b) calls on regulators to clarify legal duties with respect to “integrating climate-related aspects in decision making, install mandatory reporting requirements in line with the TCFD recommendations, and support the development of a harmonised taxonomy for low-carbon investments”. Sovereign funds could support the implementation of this kind of regulatory reforms.

Box 6. Consolidation of climate-related reporting and classification standards

The lack of a generally accepted framework or standards on climate-related reporting and classification has been a significant hindrance to the broad adoption of climate-relevant investment practices. This includes common standards to describe the climate-relevant characteristics of economic activities, assets and financial products. Until recently, NGOs and industry organisations have produced a diversity of climate finance classification and reporting frameworks, whereas official standard setting bodies and regulators have been lagging behind.

This has meant that investors lack clarity of what constitutes a “green” investment, which has muddied the waters for asset owners and managers that wish to green their practices and portfolios, and has increased the risk of “greenwashing” of assets – the practice of reporting assets as “greener” than they actually are. The lack of generally accepted standards has also made it difficult to compare the climate performance of firms, asset managers and asset owners, and has probably translated into less pressure on asset owners and asset managers to disclose their climate-related activities.

A process of consolidation is currently taking place, whereby intergovernmental bodies are getting more involved in the consolidation of climate finance reporting and classification frameworks.

First, the Recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD, 2017[39]), established by the Financial Stability Board, constitutes a milestone for defining climate-related disclosures. The TCFD recommends disclosures in the areas of governance, strategy, risk management, and metrics and targets. More specifically, this means that companies should report on (1) the role of the board and management in the company’s response to climate change; (2) how strategic planning takes climate change into account; (3) the integration of climate risk in risk management procedures; and (4) performance against indicators that are based on the company’s climate strategy and risk management.

Second, there has been important progress towards establishing a generally applicable standard of environmentally sustainable economic activities and assets. The European Union’s Taxonomy for environmentally sustainable activities seeks to fill this gap, albeit on a voluntary basis. The framework, which was agreed in December 2019 by the European Council and the European Parliament, is expected to come into force by the end of 2021. China proposed a taxonomy for green finance in 2013, and other jurisdictions have also adopted legislative standards for financial products.

Third, consolidation is also taking place in the green bonds space. In 2015, China introduced the Green Bond Endorsed Project Catalogue, the world’s first official standard for green bonds. The European Union is currently in the process of establishing an EU Green Bonds standard.

The consolidation of reporting frameworks represents an opportunity for sovereign funds that seek to implement climate-aligned disclosure and reporting, since it provides sovereign funds with clearly defined standards to align with.

Sources: (TCFD, 2017[39]), (EU Technical Expert Group on Sustainable Finance, 2019[40]).

Strategic investment funds

Many of the obstacles to climate-aligned investment that sovereign funds face are not relevant to SIFs. Several SIFs have a mandate to invest in green infrastructure and already assume related costs. As investors focus mainly on real assets, SIFs seek from the outset to be equipped with the capabilities necessary to invest directly in the sectors of their interest. Since most SIFs do not invest through intermediaries, they do not face principal-agent challenges when deploying capital, and SIFs frequently develop new infrastructure projects rather than seeking attractive investment opportunities in operational infrastructure. Since SIFs tend to invest significant minority shares, they have the leverage to push for portfolio companies’ reporting of climate-relevant data, and as “double bottom line” investors, they consider non-financial as well as financial results.

For SIFs, a main challenge is to find the right balance between commercial and policy-driven investment, to manage the “double bottom line”. An SIF with an excessively commercial orientation risks providing capital for investments that the private sector would have undertaken anyway – crowding out rather than crowding in private capital, and therefore providing little additionality. Conversely, an SIF with an excessively policy-determined modus operandi risks straying into the domain of non-commercial expenditures, which is the prerogative of government budgets (Gelb, Tordo and Halland, 2014[9]) (Halland, Noel and Tordo, 2016[10]).

SIFs’ commercial orientation is what disciplines their investment process. It also provides them with necessary integrity vis-à-vis private sector partners. This commercial orientation is therefore a main foundation of their capacity to mobilise capital from private investors (OECD, 2019[7]). At the same time, SIFs exist to provide financial sector functions that the private sector would not provide by itself. In general terms, SIFs address this duality of purpose at four different levels: mandate, governance, skills and private sector orientation (Halland, Noel and Tordo, 2016[10]).

Mandate

SIFs are commonly set up to operate as commercial investors within a specific mandate. For example, the European Union’s Marguerite Fund invests exclusively in early-stage infrastructure. Within this mandate, however, the fund operates as a commercial, profit-maximising investor and is managed by a private, partner-owned investment management company.

Governance

SIFs differ significantly with regard to their legal status and governance structure. However, each type of legal and governance structure seeks in a different way to insulate the SIFs commercial investment decisions from its government owner, and from political influence in general. This can be done, for example, by setting the SIF up under standard legislation for private equity funds, and establishing a private company to manage the SIF, as is the case for Marguerite. In the case of India’s National Investment and Infrastructure Fund (NIIF), the Indian government owns a minority 49% of the fund, and has only two representatives on the fund’s seven-person board. Like Marguerite, the NIIF is established under standard legislation for investment funds. The Ireland Strategic Investment Fund (ISIF) is part of the National Treasury Management Agency, a government agency, but its governance and decision-making framework contains a number of safeguards to enhance the commercial orientation of the fund.

Skills

SIFs take their genealogy from private equity funds, and recruit their board members, management and staff primarily from the private sector. For example, the Nigeria Sovereign Investment Authority (NSIA), which combines the functions of a sovereign fund and an SIF through its three sub-funds, has a board consisting entirely of representatives recruited from the private sector. Similarly, the NSIA recruits its management and staff from the private financial sector, and several senior executives recruited from the Nigerian diaspora have gained experience in global financial centres such as the City of London, Wall Street and Dubai.

Private sector orientation

The participation of private capital, either at the level of the SIF itself (at the fund level), or at the project level helps ensure that the SIF operates on commercial terms. Another benefit of private sector participation is that private co-investors can bring capacity and skills to due diligence and other aspects of the investment process.

As an example, when the Indian government set up the NIIF, it intentionally established the entity that would manage it, NIIF Limited, as a company rather than as a government agency. The purpose was to enhance the independence of the NIIF’s investment decisions from political interference, and emphasise NIIF Limited’s role as a commercial investment manager. Investors in the NIIF Master Fund are entitled to an equivalent ownership share in NIIF Limited, and investors representing more than 10% of the NIIF Master Fund’s capital are entitled to board seats at NIIF Limited (NIIFIndia, 2020[41]; TCFD, 2017[39]).

Collaboration between sovereign funds and SIFs: Harnessing their potential for enhanced climate finance and action

The complementarities between sovereign funds and SIFs present opportunities for creating productive synergies between these two types of investment funds. As discussed above, sovereign funds hold very large amounts of capital, invested in different types of securities, while having limited capabilities for infrastructure investment, and for direct investment. SIFs, on the other hand, are small compared to sovereign funds, and are set up for direct investment, most commonly in infrastructure and SMEs. Many SIFs have the capabilities needed for investing in the development and construction of new infrastructure. This is a capacity that nearly all sovereign funds lack, with the exception of Abu Dhabi’s Mubadala Investment Company, through its subsidiary Masdar (Box 2).

To take advantage of these complementarities for investment in low-carbon infrastructure, sovereign funds could channel part of their capital through SIFs, or they could set up joint investment platforms with SIFs. The investments of Temasek, Ontario Teachers’, the Canada Pension Plans Investment Board, and AustralianSuper into India’s NIIF, discussed above, confirm that it can be attractive for large institutional investors to provide capital for a specialised national infrastructure investor. Furthermore, institutional investors, including several large Canadian pension funds, are increasingly collaborating on direct investment, particularly in the infrastructure sectors (Box 3). Working through co-investment platforms allows them to pool resources and expertise to co-invest, while taking advantage of different partners’ informational and/or geographical advantages (Singh Bachher, Dixon and Monk, 2017[11]).

There are several benefits to this kind of collaboration. First, sovereign funds can take advantage of SIFs’ knowledge of their home markets, and ability to identify and monitor projects on the ground. Second, collaboration with SIFs can strengthen sovereign funds’ deal flow, since the SIF as a local partner can identify, source and validate investment projects that sovereign funds may otherwise find it difficult to access. Third, collaboration with SIFs provides sovereign funds with opportunities for diversification. Fourth, collaboration allows sovereign funds and SIFs to share the costs of due diligence, research and monitoring. Fifth, collaboration through a joint platform allows for bypassing conventional intermediaries, thereby retaining governance rights and more direct control of investments. Sixth, as local partners SIFs can minimise headline risk and mitigate political risk. (Singh Bachher, Dixon and Monk, 2017[11]) provide a detailed discussion of these aspects of collaboration among institutional investors.