13 To obtain a positive rating, a project must make a contribution to the host country’s development. The DOTS does not have a formal methodology to assess the trade-off between financial and other performance categories. However, projects are not “created equal”: while some generate positive development outcomes, others do not or even intensify tensions with affected communities; some projects engage communities in design and implementation, while others use a top-down approach; some mitigate risk while others may even increase it. To fill this gap and in order to remove the subjectivity of rating, a new financial valuation tool, the Sustainability Program Quality Framework, has been developed that attempts to capture the full value of sustainability/social programs. The framework includes a Self-Assessment Tool, which generates a numerical score ranging from 1 (ineffective) to 4 (excellent), and a Quality Benchmark Matrix, which maps scores to practices characterized at each scoring level. The score can be inputted into the Financial Valuation Tool’s quality ranking sections. The tool is being applied on a pilot basis.

Further lessons can be sought from OECD countries’ investment practices. For example in the United Kingdom a ‘Green Book’ provides a methodology for assessing the business cases of public investments. The business case sets out the strategic case (i.e. whether the proposal is supported by a robust case for change); the economic case (where there is value for money); the commercial case; the financial case; and the management case (i.e. whether the project can be delivered successfully). When reviewing a business case, officials seek to make a judgment as to whether the project is affordable, in line with other objectives and value for money.

_Source: International Financial Corporation_ _<u>https://www.fvtool.com/page.php?node=aWQ9OTA=; UK Treasury http://www.hmtreasury.gov.uk/Economic_Data_and_Tools/Greenbook/data_greenbook_index.cfm</u>_ <u>.</u> Seeking domestic investment opportunities with market or close-to-market financial returns and where private investors can be crowded in by the assurance of some public financial support implies that the domestic investment program of the SWF cannot be driven by quantity mandates, for example, to hold a particular percentage of its portfolio in domestic investments. It needs to be able to shape the rhythm of domestic investment according to the opportunities available and consistent with macroeconomic policy tradeoff. In the upswing of the resource cycle, the fund may see relatively few domestic opportunities relative to its rapidly growing resources. In this case it should not be forced to invest domestically into low-quality projects. The SWF should be free to plan its portfolio with a long term perspective, including by investing domestically only as good opportunities emerge. Furthermore, potentially attractive domestic investments should be allowed to compete with foreign assets for investable funds based on expected returns and sound investment management principles.

# **4.3 Invest through partnerships**

SWFs are usually permitted by their charters to invest in traded securities only as minority shareholders. A similar principle should apply to domestic investments, whether portfolio or direct. This opens up the investment decision to external evaluation, adds to the expertise at the disposal of the fund, and also creates a more credible investor body to monitor the implementation of the investment and the policy framework that affects its financial performance. SWFs that make equity investments may be passive and long term investors with no desire to impact company decisions by actively using their voting rights, or have a more active ownership policy. Explicit limitations may also be imposed in the establishment law.

Funds can actively seek to create investor pools with each other and with other sources of institutional capital, as well as with private investors (Box 8). Partnership agreements at project or portfolio level may be crafted to strengthen the SWFs investment efficiency and investment selection process, to mirror those used by private equity investors. They might also seek to leverage the investments of the Multilateral Development Banks. For example, the Oman-India Joint Investment Fund (OIJIF), a co-investment vehicle between the Oman State General Reserve Fund (SGRF) and the State Bank of India, was set up in 2010 to 13