Sovereignty implies that Independent countries can self-govern free from external control.
Saint Lucia is self-governing to the extent that 46 years ago, it ceased being a British colony. Over this time, it has managed its internal affairs (passed its own laws, policies, and Budgets, etc.), and its external affairs (determined the countries with whom it would seek to build friendly relations). However, the sobering reality is that with their inherent vulnerabilities, including their small size, open economies, and heavy dependence on strategic imports, SIDS, like Saint Lucia, cannot claim to be truly independent. At some stage, they have had to bow to the dictates of powerful countries, exercised directly or through multilateral organizations, such as the World Bank and the IMF on issues, such as capital punishment, economic incentives, structural adjustment and loan conditionalities.
Even so, I have argued for some time that SIDS should stop treating vulnerability and dependence as fatal illnesses and urgently do all they can to build social, economic and environmental resilience and to strengthen their de facto Independence.
Against this background, it was deeply pleasing to note that on March 14, 2025, Saint Lucia’s House of Assembly debated and passed a Sovereign Wealth Fund (SWF) Bill, to support investments in climate change adaptation, mitigation and sustainable economic development. It’s not clear why sustainable economic development is treated as a separate area, as it is not achievable in the absence of effective climate change adaptation and mitigation. However, this observation in no way diminishes the laudatory intentions and likely positive benefits of the proposed SWF.
There isn’t one SIDS leader over the past 30 years or so, who hasn’t flagged climate change as an existential threat to the sustainable development of SIDS. While nearly all SIDS have developed policies and strategies to adapt to and mitigate climate change, not many have taken deliberate steps to self-finance the implementation of these instruments. Many SIDS appear to be awaiting funding promised by developed countries, which have yet to be fulfilled.
The inclusion of climate change mitigation as a focus area of the SWF is noteworthy. I readily confess to being among the early critics of the Paris Accord (PA) who argued that because SIDS generate a minuscule amount of greenhouse gases (GHGs) that cause climate change, mitigation is not their responsibility. In hindsight, I accepted that committing all countries to reduce their carbon footprint should benefit SIDS. If they rely more on renewable energy and use traditional forms of energy more efficiently, SIDS will save precious foreign exchange and national income which they can use to pursue climate-resilient development.
Provided it is well managed, Saint Lucia’s SWF can achieve its intended purpose. Some 90 countries around the world have their own SWFs, with total assets of more than $8 trillion. The largest of these are in Norway and China, the United Arab Emirates, Saudi Arabia, Kuwait, Abu Dhabi, and Singapore. Nearly half of US states have set up SWFs, with those owned by Alaska, North Dakota, and Texas being among the biggest of the lot. President Trump plans to establish an SWF with more than $2 trillion in assets.
Most global SWFs are based on surplus revenues from: the sale of commodities; foreign exchange reserves derived from exports; and tax revenue. According to the Bill, Saint Lucia’s SWF will be financed primarily from: monies from the Saint Lucia National Economic Fund; capital from privatization proceeds; dividends received on investment; and funds from other sources approved by the Board of the SWF. If surpluses are to ‘energise” the SWF, wasteful expenditure will have to be curbed and underutilized public assets put to more productive use, or transferred to the private sector, if this is determined to be in the national interest.
Much of the Bill aims at ensuring the SWF is prudently managed. This emphasis is justified by the role that corruption, nepotism, political partisanship and interference have played in the collapse of some large SWFs. These failures prompted the adoption in 2008 of “The Santiago Principles” which emphasize transparency, accountability, and sound investment practices and aim to: (a) maintain a stable global financial system and free flow of capital and investment; (b) promote compliance with all applicable regulatory and disclosure requirements in the countries in which SWFs invest; (c) ensure that SWFs investments are based on economic and financial risk and return-related considerations; and (d) ensure that SWFs have in place a transparent and sound governance structure that provides adequate operational controls, risk management, and accountability.
In short order, the Board of Saint Lucia’s SWF will have to develop clear rules to determine what portion of revenue can be spent/saved; when withdrawals can be made from the fund; and where revenue can be invested in foreign or domestic assets.
While these imperatives help to explain the emphasis on people with sound backgrounds in economics, finance, accounting and law on the SWF’s Board, it is hoped that ultimately, people with a background in climate change adaptation and mitigation will be included. This recommendation is easily justified, not only by the fact that climate change is the raison d’etre for the creation of the SWF, but also because of the link that the Bill establishes between the SWF and Saint Lucia’s Climate Change Adaptation Policy (CCAP), and by extension to Saint Lucia’s Nationally Determined Contributions (NDCs), which outlines the efforts it will take to reduce its carbon emissions.
However, merely linking the SWF with the CCAP and NDC will not automatically produce climate-resilient development. The plans in both documents will have to be converted into fungible projects that are designed with climate risk in mind. In addition to “process risk” and “people risk” the SWF Board must always include climate risk in its investment decisions. Here, it should be guided by the behaviour of insurance companies and “think twice” before investing in any country or region where these companies do not have a strong presence.