CIC: Double Bottom Line Investor?

Ashby Monk

How many resource investments can one SWF make? The CIC continues to astound by funneling huge (inordinate?) sums of money into energy and commodity investments around the world. Of the $40 billion it has already invested in 2009, I’d wager that upwards of $30 billion have been in resources. In September alone it spent nearly $4 billion. To me, this doesn’t look like the type of diversified investment approach that one would expect from a $300 billion investor. What’s going on?

You’d be forgiven for assuming the CIC was investing in the “national interest.” Indeed, the CIC’s newfound taste for commodities would clearly jive with China’s voracious appetite for such things. However, the CIC is working hard to dismiss such claims:

“I don’t care about how many tons of oil to ship home, I care about whether stocks are worth more money,” says Lou Jiwei.

So why resources? Apparently, the CIC sees an asset bubble forming and wants real assets to hedge against inflation. This is probably wise, especially since most of China’s forex reserves are locked up in US Treasuries. There are lots of us that are currently worrying about inflationary pressures.

Nonetheless, it strikes me that we might be looking at a SWF that is investing with a “double bottom line.” Like other DBL investors, the focus remains “profit.” But other factors are considered, such as urban development or green initiatives. In the case of the CIC, it seems totally reasonable to invest in resources from a purely commercial perspective. But if it serves the national interest, so much the better!

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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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