IFSWF Santiago Principles

Santiago Principles Self-Assessment

HCAP 2022

    Institutional Framework and Governance Structure.
    Principle 6

    6. The governance framework for the SWF should be sound and establish a clear and effective division of roles and responsibilities in order to facilitate accountability and operational independence in the management of the SWF to pursue its objectives.

    The fund’s law provides for clear operational independence from the State. Furthermore, a supplementary arm’s length provision is included: to detach the fund’s management appointment from political cycles, the fund’s Board of Directors is selected by a Supervisory Board and not by its General Assembly, in contrast to general corporate legislation. 

    The fund’s Supervisory Board (“SB”) is responsible for the evaluation, selection, and revoke of the fund’s Board Members “BoD”) based on criteria and targets that serve the fund’s mission.

    The fund’s law clearly states each body’s responsibilities to achieve operational independence and mission fulfilment.

    This means that although the fund is flagged as a GGE for statistical and fiscal purposes, it is outside the core public sector. 

    The State provides the fund with high-level objectives for 3-5 years, as the fund is a key tool of economic policy. However, the fund and its management have full independence when deciding the strategies and specific targets, upon which the SB evaluates them annually.

    7. The owner should set the objectives of the SWF, appoint the members of its governing body(ies) in accordance with clearly defined procedures, and exercise oversight over the SWF’s operations.

    The owner, the MoF, sets its high-level objectives in the Strategic Guidelines, as provided by the fund’s law. 

    It is then the fund's responsibility to transform these guidelines into a strategic plan. Once the Plan is articulated, it is submitted to the shareholder for approval so that the owner can confirm the alignment of the fund’s objectives with the state’s objectives. 

    The Strategic Plan provides the basis for the fund’s Business Plan and annual budget. 

    The oversight and alignment of the fund’s operations are achieved by submitting its annual statements to the General Assembly for approval and appropriate release from liability for the BoD members. 

    The relevant process is described in the fund’s Internal Regulation and is publicly available on the fund’s corporate webpage under the section Company > Strategic Plan. It is also available along with the process description, the current Strategic Plan, which runs for the period 2022-2024. Some key and confidential commercial information has been omitted from the publicly available file, an option provided by the fund’s Internal Regulation.

    8. The governing body(ies) should act in the best interests of the SWF, and have a clear mandate and adequate authority and competency to carry out its functions.

    The governing body's obligations are clearly stated in the fund’s law. The fund’s mission and mandate are also explicitly stated in the founding legislation.

    Furthermore, the specific interests of the State, as it is represented by the Minister of Finance in Growthfund’s General Assembly, are described in its Strategic Guidelines and are further developed through the process of Strategic and Business Planning described in previous GAPPs.

    Lastly, the law provides the minimum competencies for the fund’s Board Members, providing a supplementary safety net to attract adequate members to carry out the fund’s functions. 

    9. The operational management of the SWF should implement the SWF’s strategies in an independent manner and in accordance with clearly defined responsibilities.

    As stated in previous GAPPs, Growthfund’s management is completely independent from the State, by virtue of being appointed by an independent Supervisory Board, and their responsibilities are clearly defined in the fund’s law (including the fund’s statute). Moreover, through the Strategic and Business Planning framework that the fund is implementing, the State provides for its broad policy targets, and it is the fund’s full independence to decide how to achieve those.

    10. The accountability framework for the SWF’s operations should be clearly defined in the relevant legislation, charter, other constitutive documents, or management agreement.

    The fund’s accountability framework is clearly defined and stated in its founding legislation:

    • As a Societe Anonyme, the fund is obliged to report based on the requirements of corporate law
    • In addition to the above, the fund’s law provides for additional reporting on a quarterly and semi-annual basis, following “as-if-listed” standards. All the fund’s reports are published on the fund’s website under the section Company - >Financial Results – Reports.
    • Furthermore, the fund is obliged by law to report its annual statements to the Parliament. 

    In addition to the provisions of the fund’s law, there are also chapters in the company’s internal regulation that further describe key reporting lines and information (“performance monitoring framework” and “performance audit framework”).

    11. An annual report and accompanying financial statements on the SWF’s operations and performance should be prepared in a timely fashion and in accordance with recognized international or national accounting standards in a consistent manner.

    The fund’s annual (standalone and consolidated) statements are prepared according to the IFRS and strictly follow the rules that the Greek corporate law provides regarding timing and publication.

    12. The SWF’s operations and financial statements should be audited annually in accordance with recognized international or national auditing standards in a consistent manner.

    The fund’s annual financial statements are audited by renowned external auditors in cooperation with the fund’s Audit Committee. PwC Greece audited Annual standalone financial results of 2021. 

    Furthermore, the fund’s semi-annual statements are also surveyed by external auditors based on a relevant provision by the fund’s law (this is not obligatory according to Greek corporate law. However, it is a supplementary provision to the fund’s framework).

    13. Professional and ethical standards should be clearly defined and made known to the members of the SWF’s governing body(ies), management, and staff.

    Some key professional standards for the members of the governing bodies are already set in the fund’s law. In addition, the fund has built a strong compliance function that oversees and promotes ethical standards for the governing bodies, management, and staff. 

    All staff members have job descriptions related to the fund’s organizational chart.

    The interaction of roles and responsibilities is clear as it is described as a set of internal processes that are documented and available to the fund’s employees in its intranet. 

    The areas covered indicatively are:

    • Strategic and Business planning
    • KPIs setting and monitoring
    • Reporting
    • Communication (internal and external)
    • Portfolio management
    • Investments
    • Financial Statements compilation
    • Travel & other expenses
    • Annual leave 

    14. Dealing with third parties for the purpose of the SWF’s operational management should be based on economic and financial grounds, and follow clear rules and procedures.

    All dealings with third parties are based on economic and financial grounds and are covered by the relevant policies. For instance, the fund’s procurement policy is based on the public procurement law. Furthermore, there are provisions to the fund’s investment policy and technical supplement on the appointment and evaluation of external managers.

    In addition to the above, the fund’s law also provides that the dealings between the fund’s subsidiaries should be done at arm’s length and on purely commercial and financial grounds (unless not applicable).

    15. SWF operations and activities in host countries should be conducted in compliance with all applicable regulatory and disclosure requirements of the countries in which they operate.

    The fund’s operations clearly abide by its founding law and internal regulation (that is amended only through approval by the Ministry of Finance).

    Furthermore, the fund and its subsidiaries’ operations and transactions are compliant with a series of other bylaws, such as :

    • The Constitution
    • Local Corporate law
    • Local listed company law
    • Hellenic Capital Markets regulation
    • EU and local State Aid legislation
    • Other EU and local directives that regulate issues relevant to urban transportation, water management, energy, telecommunications and so on.

    16. The governance framework and objectives, as well as the manner in which the SWF’s management is operationally independent from the owner, should be publicly disclosed.

    The fund's institutional framework defines the governance framework of the fund, its objectives, and how it is managed. This is publicly available both on the Government Gazette and the fund’s corporate webpage. Furthermore, the fund includes extensive relevant reporting and links to its annually published statements.

    17. Relevant financial information regarding the SWF should be publicly disclosed to demonstrate its economic and financial orientation, so as to contribute to stability in international financial markets and enhance trust in recipient countries.

    As stated in previous GAPPs, the fund’s audited (standalone and group) statements are compiled based on IFRS and published annually following their approval by the fund’s General Assembly (MoF).

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    Principle 18

    18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.

    18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.

    18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.

    18.3. A description of the investment policy of the SWF should be publicly disclosed.

    The fund’s Investment Policy is publicly available on the fund’s webpage under the section Corporate Governance > Internal Regulation. 

    The policy provides for broad objectives and asset classes. It also provides for further specialization in the fund’s Technical Supplement which is a working document that has not yet been published.

    Lastly, the fund’s reporting framework provides that it should have a separate chapter relevant to investment performance in its Annual Statements. This chapter has not yet been published, since  the fund opted not to proceed with any investments due to the economic recession and the overall economic context of the previous years.    

    19. The SWF’s investment decisions should aim to maximize risk-adjusted financial returns in a manner consistent with its investment policy, and based on economic and financial grounds.

    19.1. If investment decisions are subject to other than economic and financial considerations, these should be clearly set out in the investment policy and be publicly disclosed.

    19.2. The management of an SWF’s assets should be consistent with what is generally accepted as sound asset management principles.

    Growthfund’s Investments framework (Policy & Technical Supplement) provides for five key asset classes that differ from each other in terms of returns and risk parameters. These five asset classes constitute the fund’s strategic and tactical asset allocation, approved by its shareholder, ensuring a proper balance between return, risk and policy-making, if applicable. Each targeted asset class refers to and is gauged against specific benchmarks, making Growthfund’s investments transparent and having clear and defined returns, ex-ante. 

    Furthermore, the fund’s policy provides for investing for reasons other than financial or economic returns, e.g. in distressed companies that need to be supported to deliver public policy objectives.

    The management of the fund’s portfolio (both the legacy portfolio and the portfolio acquired through investments) is managed through generally accepted asset management principles, as in its totality, it has to achieve the return and overall targets set by the sole shareholder in its Strategic Guidelines and the relevant Strategic Plan.

    20. The SWF should not seek or take advantage of privileged information or inappropriate influence by the broader government in competing with private entities.

    The fund is obliged by its institutional framework to operate in good business terms overall. Furthermore, the fund must abide by the rules of competition set out in the EU’s competition framework.

    21. SWFs view shareholder ownership rights as a fundamental element of their equity investments’ value. If an SWF chooses to exercise its ownership rights, it should do so in a manner that is consistent with its investment policy and protects the financial value of its investments. The SWF should publicly disclose its general approach to voting securities of listed entities, including the key factors guiding its exercise of ownership rights.

    The fund’s ownership rights are covered by the sole shareholder’s Strategic Guidelines; in it, the Minister of Finance, states the minimum participation percentages that they  wishes for the fund to maintain in the forthcoming years. The fund can suggest some deviation from the Minister’s guidelines. However, this requires approval by its General Assembly.

    The fund exercises its ownership rights in a prudent manner, respecting several bylaws that cover its’ subsidiaries’ operations, such as the Greek corporate law, the law for the listed entities and so on.

    Lastly, the fund is represented on the boards of its subsidiaries by Growthfund employees appointed as representatives. These members are asked to follow a specific policy and seek internal consensus before voting on a series of important issues, such as the subsidiary’s annual budget, any strategic or business plans, and so on.

    22. The SWF should have a framework that identifies, assesses, and manages the risks of its operations.

    22.1. The risk management framework should include reliable information and timely reporting systems, which should enable the adequate monitoring and management of relevant risks within acceptable parameters and levels, control and incentive mechanisms, codes of conduct, business continuity planning, and an independent audit function.

    22.2. The general approach to the SWF’s risk management framework should be publicly disclosed.

    23. The assets and investment performance (absolute and relative to benchmarks, if any) of the SWF should be measured and reported to the owner according to clearly defined principles or standards.

    Growthfund’s overall performance (both as a group and standalone) is published annually in its financial statements. The owner is not only informed, but it has the right to approve (thus release the fund’s BoD from any liability) or reject the fund’s results, initiating the revocation of its BoD members.

    Furthermore, the fund publishes quarterly reports for the parent company, an annual sustainability report, and an annual corporate governance declaration.

    In addition to the above, supplementary provisions for reporting relate to investments, the performance of some subsidiaries assigned to deliver some public service, etc.

    24. A process of regular review of the implementation of the GAPP should be engaged in by or on behalf of the SWF.

    Growthfund is committed to reviewing the implementation of the GAPP on a bi-annual basis.