IFSWF Santiago Principles

Santiago Principles Self-Assessment

PIF 2021

    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.

    PIF’s governance manual sets the overall governance structure for PIF and provides clear roles and responsibilities for each level. It also provides a strict authority matrix for decision making process.

    PIF’s governance structure is based on the following three pillars:

    1. A General Assembly comprises of 30 independent members representing PIF’s ultimate shareholder, the people of Palestine. General Assembly members are appointed by the President and representing the business community, academia, regulatory agencies and civil society. The General Assembly provides strategic guidance to the Board of Directors, approves annual reports and financial statements, appoints external auditor and approves the distribution of dividends to the Palestinian treasury.
    2. A Board of Directors comprises of 11 independent members appointed by the President from leading business figures, economists and policy makers. The Board is responsible for setting PIF’s goals and objectives, strategy, assets allocation, and overseeing PIF operations. The Board has the following committees; audit and governance committee, investment committee, and Human Resources committee.
    3. An executive management team responsible for implementing PIF’s strategy and overseeing daily operations. The management team reports to the Board of Directors.


    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.

    PIF ‘s articles of association/ bylaws and governance manual state the process of appointing the governance bodies, according to which, the Board of Directors and the General Assembly are appointed by the Palestinian President (see GAPPs 1 and 2).

    PIF’s annual reports, which include PIF’s audited financial statements, are prepared and submitted to the President and the various governmental bodies and published on PIF’s website.

    In addition, PIF’s operations are subject to audit by the state audit and administrative control bureau which reports to the president, government and the legislative council.

    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 Board of Director is responsible for setting PIF’s goals and objectives, strategy, assets allocation, and overseeing PIF operations. The Board has a clear mandate and adequate authority and competency to fulfil its functions. The roles and responsibilities of the Board are clearly defined in PIF’s articles of association/ bylaws and governance manual. The Board Responsibilities include among other things:

    • Establishing strategic goals, objectives and appropriate corporate policies;
    • Reviewing and approving the strategic and business plans;
    • Reviewing and evaluating PIF’s initiatives, programs and subsidiaries on regular basis;
    • Approving company-wide policies, including authority matrices, investment, procurement, human resources, code of conduct, corporate governance, and transparency and disclosure policies;
    • Monitoring the performance of PIF executive management;
    • Approving investment and procurement decisions in line with the approved Authority Matrix;
    • Ensuring ethical behavior and compliance with laws and regulations;
    • Ruling on any cases of conflict of interest at the Board or executive management levels;

    The Board carries out its duties through number of active committees including; investment committee, audit and governance committee, and Human resources committee.


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

    PIF is an independent legal entity with an independent Board of Directors. The Board is the highest authority at PIF, it approves strategy and assets allocation, approves investment decisions, and oversees PIF operations.

    An independent executive management team is responsible for executing the investment strategy and assets allocation, managing the daily operations, and making operational decisions.  The executive management operates in accordance with the corporate law, PIF articles of association/ bylaws, governance manual and well-defined internal policies and procedures manuals and in line with a strict authority matrix.

    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 accountability framework is clearly defined in PIF’s articles of association/ bylaws and corporate governance manual.

    Additional requirements are set in the Palestinian corporate law including the mandatory duties and responsibilities of the Board of Directors, General Assembly and management. It also includes the requirement to issue audited financial statements.

    Finally, external accountability is ensured as PIF’s operations and accounts are subject to audit by the state audit and administrative control bureau, which reports to the Palestinian President, Palestinian Government and the Legislative Council.

    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.

    PIF issues a full set of annual audited financial statements including notes to the financial statements and disclosure of accounting policies within 90 days of year end. The financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and audited by an international audit firm.

    The financial statements form a part of PIF’s annual report which also provides additional information about the performance of PIF’s investments. The annual report is widely distributed and posted on PIF’s website.


    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.

    PIF’s full set of annual financial statements are audited by an international audit firm (currently Ernst & Young) in accordance with International Standards on Auditing (“ISA”). The audited financial statements and the auditors’ report are published in PIF’s annual report and posted on PIF’s website.

    In addition, PIF’s accounts and operations are subject to audit by the internal audit department, which reports directly to the audit committee of the Board. The internal audit department works in cooperation with an international audit firm (currently Deloitte).

    Finally, PIF accounts and operations are subject to audit by state audit and administrative control bureau, which reports to the President, Government and the Legislative Council.


    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.

    The articles of association/ bylaws and governance manual set the detailed requirements and qualifications for Board Membership.

    The human resources manual sets the detailed education and professional experience requirements for each level at PIF.

    PIF’s governance manual sets the guidelines for ethical practices at PIF including conflict of interest.

    In addition, all employees who are involved in capital markets investments including those; conducting research, writing research reports, making investment recommendations, taking investment action, or come in contact with investment recommendations or decisions during the decision-making process, adhere to the CFA Institute Code of Ethics and Standards of Professional Conduct.

    Finally, PIF’s human resources manual, employment contracts and the operational policies and procedures manuals that govern the various operations of PIF set the acceptable ethical practices to be adhered to by PIF staff.

    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.

    PIF uses its internal portfolio managers to manage most of the investments. The use of external fund managers is limited to investments in international capital markets. External fund managers are chosen for their experience and ability to exploit investment opportunities in these markets. External fund managers selection is made based on professional and commercial criteria.

    PIF’s procurement of goods and services are governed by the procurement policies and procedures manual which requires fair and transparent tendering procedures.

    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 majority of PIF investments are in the local market. International investments are limited to investments in capital markets through external fund managers, who ensure compliance with all applicable regulatory and disclosure requirements of the related host countries.

    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 governance framework and its operational independence are disclosed in PIF’s annual reports and website.

    Information disclosed include, among other things; the organization structure, executive management composition, the role of the Board and General Assembly, and the role of internal and external auditors.


    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.

    Annual reports including the audited annual financial statements are published regularly, and publicly disclosed on PIF’s website.

    In addition to financial statements the annual report includes, among other things, information about assets allocations, key investments, return on investments, and dividend distribution. This information is also posted on PIF’s website.

    The size of PIF’s investments in international markets poses no risk to financial stability of these markets.

    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.

    PIF’s investment strategy is derived from PIF’s main objective of promoting sustainable economic growth and private sector development in Palestine.

    PIF’s three years investment strategy is reviewed and approved by the Board of Directors. This strategy is reflected in the annual business plan which sets the priority for assets allocation as follows:

    1. Originating and investing in strategic projects in underdeveloped and vital sectors in Palestine, in partnership with the Palestinian private sector and international investors.
    2. Maintaining a foreign assets portfolio that composed of highly liquid capital markets investments, with the goal of maximizing return while minimizing risk, until adequate opportunities arise for deploying these funds in Palestine.

    The use of leverage is limited to investments in private equity, mainly in the real estate sector.

    PIF use of derivatives (Swaps and forwards) is limited for hedging currency positions.

    PIF depends mainly on internal fund managers to manage its portfolios, the use of external fund managers is limited to investments in international capital markets. Fund managers activities, authorities and selection are governed by PIF’s Capital Markets Policies and Procedures manual.

    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.

    PIF investment decisions are made on economic and financial bases and in line with PIF’s strategy.

    PIF is focusing on investments that have developmental impact on the Palestinian economy;

    • create quality jobs and support female employment,
    • assert economic rights and reduce market captivity;
    • crowd in investment capital;
    • spur growth in marginalized communities; and,
    • promote innovation.

    While achieving an acceptable financial return that ensures PIF’s sustainability and organizational health

    All investment activities are executed in line with the highest standards for asset management and guided by a clear governance structure that regulates investment decision making process. According to this structure all investment decisions are reviewed by PIF’s executive committee and approved either by the Board investment committee or the Board of Directors based on a clear authority matrix.

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

    PIF is a separate legal entity governed by an independent Board of Directors. PIF is subject to the Palestinian corporate law and pay taxes like any other private entity.

    Further, one of the key objectives of PIF is private sector development in Palestine. In doing so, the majority of PIF projects in the local market are performed in partnership/ cooperation with the private sector.


    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.

    A policy on shareholder ownership rights has not been established yet. However, the current practice is that PIF exercises it ownership rights only in its investments in the domestic market and where PIF holds a significant share, with the primary objective of protecting the financial interests of PIF and the general shareholders.

    For international investments, PIF follows a passive investment approach.

    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.

    Quarterly reports on investment performance are prepared for the Board of Directors.

    The annual reports, including audited financial statements, are distributed to the President, the Government and available to the general public.

    In addition, PIF website includes detailed information about the economic impact of PIF investments. For more details refer to PIF website:


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

    The implementation of GAAP is reviewed annually. The review is performed as part of the internal audit department annual plan.