Report: Australia implements first sovereign wealth code

Australia will increase its scrutiny of sovereign wealth funds, according to media reports.

The government has set out six principles to vet investments made by the state investment bodies. The initiative makes Australia the first country to set out how it intends to interact with the controversial state investment firms.

The Australian government will in future examine the extent to which funds “are independent from the relevant foreign government,” including whether they operate at arm’s length from government and their funding arrangements.

Australia will also scrutinise whether the firm pursues clear commercial objectives and maintains good corporate governance practices. It will examine if such investments lead to undue concentration or control in the industry or sectors affected.

It will also study the impact an investment might have on Australian tax revenue or government policies, as well as the investment’s national security impact. The impact on the target business’ activities and its contribution to the Australian economy and broader community will also be examined.

Worldwide interest in sovereign wealth funds has increased following the spate of acquisitions and investments by the state-backed investors last year.