Generally Accepted Principles And Practices - GAPP

There are a lot of things that can motivate us to invest in one company instead of another, and not all of them are financial. If, for example, we’re all about saving the planet, we might choose to only invest in companies and funds that share our green values, regardless of the financial return. And that’s cool for us as individuals, because so what if our investments are motivated by our personal values or political ideology? It’s our money, right?

Right. But when it’s governments doing the investing, we tend to be a little less warm and fuzzy about politically-motivated investments.

If the goal of sovereign wealth funds (the fancy name for governments’ investment funds) is to maintain global financial stability, then we want those countries to act in the best interest of the economic sphere only. We don’t want their politics to get in the way and mess everything up.

Which is why the International Working Group of the Sovereign Wealth Funds (“IWG” to its friends) came up with GAPP. GAPP (a.k.a. “Generally Accepted Principles and Practices,” a.k.a. “the Santiago Principles”) is basically a list of guidelines to help its members stay out of those murky political investment waters. There are 24 specific guidelines, and they cover stuff ranging from having an independent auditing process to abiding by certain ethical practices. The idea is that government investments should be transparent, accountable, independent, and chock full of scruples.

The good news is that many of the world’s SWFs (that’s “Sovereign Wealth Funds,” not “single white females”) have signed onto GAPP. The maybe less-great news is that, since participation is voluntary, some nations have said “thanks, but no thanks” and continued to invest according to their own principles and practices.