Generally Accepted Principles and Practices (GAPP)
What GAPP Are
Generally Accepted Principles and Practices (GAPP), also known as the Santiago Principles, are a set of voluntary standards for sovereign wealth funds (SWFs). They promote transparent, prudent, and professional governance and investment practices so that SWFs operate on financial and economic grounds rather than political objectives.
Purpose and Objectives
GAPP were developed to address investor and regulatory concerns about SWF transparency, independence, and governance. Their primary objectives are to ensure that SWFs:
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- Help maintain a stable global financial system and support the free flow of capital.
- Comply with applicable regulatory and disclosure requirements in jurisdictions where they invest.
- Base investment decisions on economic and financial risk‑return considerations.
- Implement transparent and sound governance structures with adequate operational controls, risk management, and accountability.
The Santiago Principles Framework
The Santiago Principles consist of 24 voluntary principles grouped around three core areas:
- Legal and Institutional Framework
- Clear legal basis, objectives, and mandate for the SWF.
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Defined ownership, governance, and accountability structures.
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Governance and Operational Framework
- Robust internal controls, transparency, and reporting.
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Decisions insulated from political interference and conflicts of interest managed.
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Investment and Risk Management
- Policies grounded in economic and financial analysis.
- Appropriate risk management, due diligence, and disclosure of investment practices.
Implementation and Oversight
The International Forum of Sovereign Wealth Funds (IFSWF) promotes and supports adoption of the Santiago Principles. Membership is voluntary; participating funds endorse the principles and work to implement them in governance and investment operations. The forum facilitates peer exchange, best practices, and public commitment to the standards.
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Key Takeaways
- GAPP/Santiago Principles set voluntary, internationally recognized standards for SWF behavior.
- They emphasize transparency, sound governance, regulatory compliance, and economically driven investment.
- Adoption is voluntary and supported through peer cooperation via the IFSWF, helping to build confidence among investors and host countries.