SWF Legitimacy: Process Over Substance?

Ashby Monk

In our latest paper, Gordon and I examine the ethical investment policies of Norway’s SWF and their role in securing domestic legitimacy. We conclude that Estlund’s notion of epistemic proceduralism is particularly appropriate in Norway, as it is a means of legitimating institutions by virtue of the processes used to represent the public interest rather than the functionality of those institutions against certain expected outcomes. As we argue in the paper:

“There is a paradox deeply embedded in the governance of the GPF-G. On one side of the equation, it is clear that the procedures developed to give effect to the public interest in ethics and global justice have been very important in representing shared commitments to Norway’s international obligations. The recommendations of the Council on Ethics on GPF-G investment are taken very seriously by the Ministry and serve as a vital element in screening and excluding companies from the GPF-G investment portfolio. But it should be obvious that naming and shaming hardly ever moves markets, and the instant Norway disinvests another investor takes its place. There is little evidence that naming and shaming increases the long-term cost-of-capital for the affected companies. Nonetheless, naming and shaming is an essential ingredient in their process-model of institutional legitimacy: the Council and its recommendations are meant to represent public values. Whether or not these recommendations exact a penalty on the targeted companies is less important.”

1 Response to “SWF Legitimacy: Process Over Substance?”

  1. 1 rien huizer September 21, 2009 at 5:03 pm

    Looks like the Norwegians satisfy ethical needs in their community at negligible cost. But the (souvereign) Norwegian citizens, through their agents,are free to do whatever they like with their money. My concern would be that a modern, democratic country grants too much autonomy to agents inadvertedly.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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