Financing of Inovations and Sovereign Funds

73
DOI: 10.20542/0131-2227-2022-66-3-63-72
Moscow State Institute of International Relations (MGIMO University), 76, Prosp. Vernadskogo, Moscow, 119454, Russian Federation.
S. Chebanov, scheb@imemo.ru
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation.

Received 28.12.2021.

Abstract. Technology turned to be a virtual bedrock of the contemporary global economy. The prospects for successful overcoming of the multiple social, environmental, economic and geo-political strains that are challenging the future of the mankind mainly depend on the technological progress in all spheres of life. The development and large-scale introduction of qualitatively new, in many cases disruptive, technologies demand accumulation and efficient allocation of huge amounts of resources, primarily the financial ones. Since the global financial crisis of 2008–2009 sovereign wealth funds proved to be some of the most well-capitalized institutional investors and substantially increased their role in the international economic architecture. Currently, total disclosed assets under management (AUM) of 95 active state-run funds are estimated at about 9 Trillion US dollars, which presents almost 10% of the total worldwide AUM. Even more importantly, thanks to the structure of capital and statutory mandates, they can take a longer view on value creation and, thus, on operations’ planning as compared to venture funds, PE funds and other counterparts from the private sector. Far-reaching investment horizon is a feature that is critical and highly welcomed in such capital-demanding and volatile sphere as financing of innovations. According to available data, in recent years the leading sovereign wealth funds joined the global race in technologies and noticeably increased their investments in the technological sector, including transition to “green” economy, clean energy, digitalization of production, transportation and distribution, ICT-based services and business platforms. This trend can be traced since mid 2010s. Even in pandemic 2020 sovereign funds were most active in the technology sector (25% of all registered deals). The second and the third places were taken by services (including e-commerce infrastructure) and life sciences (vaccines): 18 and 17.6% respectively. This data is based on the analysis of 165 fresh annual deals worth 42 Billion US dollars. The sovereigns’ trend to get closer to the technological assets (instead of traditional equities and mortgage) is being accompanied by greater in-house expertise and skills, general sophistication of strategies and operational management. This is especially true in cases of direct investments and access to early-stage technology-focused ventures. The empirical evidence allows to expect that in a foreseeable future the sovereign wealth funds will be steadily increasing their roles in financing of global innovations.

Keywords: financing of innovations, sovereign funds, disruptive technologies, investment, venture financing, “green economy”, clean energy, e-commerce, Big Tech, edtech, startups


REFERENCES

  1. Technology and Innovation Report 2021. Catching Technological Waves. Innovation with Equity. New York, UNIDO, 2021. 196 p.
  2. Global Innovation Index 2020. Who Will Finance Innovation? Dutta S., Lanvin B., Wunsch-Vincent S., eds. Geneva, WIPO, 2020. 448 p.
  3. Global Public Investor 2020. London, Official Monetary and Financial Institutions Forum, 2020. 188 p. Available at: https://www.omfif.org/wp-content/uploads/2020/08/GPI-2020-Digital.pdf (accessed 05.12.2021).
  4. Rich A. Sovereign Wealth: Technology’s New Growth Engine. International Banker, 12.12.2019. Available at: https://Internationalbanker.Com/Finance/Sovereign-Wealth-Technologys-New-Growth-Engine/ (accessed 10.12.2021).
  5. Murgatroyd G. Sovereign Wealth Funds: Worlds in Motion. Preqin, 09.12.2020. Available at: https://www.preqin.com/insights/research/blogs/sovereign-wealth-funds-worlds-in-motion (accessed 10.12.2021).
  6. Cross-Border IPO Index: Global 2019. Baker McKenzie, 2019. Available at: https://www.bakermckenzie.com/-/media/files/insight/publications/2019/12/cb_ipo_index_igs.pdf?la=e (accessed 05.04.2021).
  7. IPO Report 2020 & Key Trends Set to Shape 2021. Baker McKenzie, December 16, 2020. Available at: https://www.bakermckenzie.com/en/insight/publications/2020/12/ipo-report-2020 (accessed 31.03.2021).
  8. Covington H. Glimpsing Our AI Future. The Alan Turing Institute, January 2019. Available at: https://www.turing.ac.uk/events/turing-lecture-glimpsing-our-ai-future (accessed 31.03.2021).
  9. Final Report to the European Commission. 30 Recommendations on Regulation, Innovation and Finance. Expert Group on Regulatory Obstacles to Financial Innovations, December 2019. Available at: https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/191113-report-expert-group-regulatory-obstacles-financial-innovation_en.pdf (accessed 31.03.2021).
  10. Global Public Investor 2021: Head First into the Post-Pandemic World. London, Official Monetary and Financial Institutions Forum, 2021. 140 p. Available at: https://www.omfif.org/wp-content/uploads/2021/07/GPI-2021.pdf (accessed 10.12.2021).
  11. Lu M. Visualizing the World’s Largest Sovereign Wealth Funds. Visual Capitalist, November 15, 2021. Available at: https://www.visualcapitalist.com/visualizing-the-worlds-largest-sovereign-wealth-funds/ (accessed 10.12.2021).
  12. Ummelas O., Taraldsen L.E. Tech Rally Drove $123 Billion Return in 2020 for World’s Largest Sovereign Wealth Fund. Fortune, 28.01.2021. Available at: https://fortune.com/2021/01/28/tech-rally-norway-returns-wealth-fund/ (accessed 10.04.2021).
  13. Fouche G., Solsvik T. Boosted by Tech Stocks, Norway Wealth Fund Earns $123 Billion in 2020. Reuters, 28.01.2021. Available at: https://www.reuters.com/article/us-norway-swf-idUSKBN29X119 (accessed 10.04.2021).
  14. Roll S. A Sovereign Wealth Fund for the Prince. Economic Reforms and Power Consolidation in Saudi Arabia. SWP Research Paper 2019/RP 08, 10.07.2019. 32 p. Available at: https://www.swp-berlin.org/en/publication/a-sovereign-wealth-fund-for-the-prince (accessed 10.12.2021).
  15. Indonesia Sovereign Wealth Fund Turns towards Tech Sector. Reuters, 10.06.2021. Available at: https://www.reuters.com/world/asia-pacific/indonesia-sovereign-wealth-fund-turns-towards-tech-sector-2021-06-10/ (accessed 10.12.2021).
  16. Chebanov S. “Green” economy: role of sovereign funds. Mirovaya ekonomika i mezhdunarodnye otnosheniya, 2019, vol. 63, no. 3, pp. 5-12. (In Russ.) Available at: https://doi.org/10.20542/0131-2227-2019-63-3-5-12  
  17. Sovereign Wealth Funds and Public Pensions Return to Making Clean Energy Investments. Sovereign Wealth Funds Institute, 21.12.2021. Available at: https://www.swfinstitute.org/news/90267/sovereign-wealth-funds-and-public-pensions-return-to-making-clean-energy-investments (accessed 23.12.2021).
  18. Marsh A. Sovereign Wealth Funds Invest in Climate Technology, Renewables. Bloomberg, 11.05.2021. Available at: https://www.bloomberg.com/news/articles/2021-05-11/sovereign-wealth-funds-invest-in-climate-technology-renewables (accessed 10.12.2021).
  19. Qatar Investment Authority Buys Stake in Rolls-Royce Small Modular Reactor Business. Sovereign Wealth Funds Institute, 20.12.2021. Available at: https://www.swfinstitute.org/news/90243/qatar-investment-authority-buys-stake-in-rolls-royce-small-modular-reactor-business (accessed 23.12.2021).
  20. Sovereign Wealth Funds 2020. Fighting the Pandemic, Embracing Change. Capapé J., ed. Segovia. IE Center for the Governance of Change, Madrid, ICEX–Invest in Spain, 2021. 59 p. Available at: https://static-frm.ie.edu/cgc/wp-content/uploads/sites/33/2019/01/IE-CGC-ICEX-SWF-REPORT-2020.pdf (accessed 16.12.2021).

Registered in System SCIENCE INDEX

For citation:
Strelets I., Chebanov S. Financing of Inovations and Sovereign Funds. World Eonomy and International Relations, 2022, vol. 66, No 3, pp. 63-72. https://doi.org/10.20542/0131-2227-2022-66-3-63-72



Comments (0)

No comments

Add comment







Indexed

 

 

 

 

Current Issue
2023, vol. 67, No. 3
Topical Themes of the Issue:
  • Tax Instruments to Stimulate Innovations in EU Countries 
  • Russia and Western Balkans: Realized and Missed Opportunities in Trade
  • Spanish Society: Stable Instability 
  • ASEAN and the Myanmar Dilemma 
  • Greater Middle East
Submit an Article
INVITATION FOR PUBLICATION
The Editorial Board invites authors to write analytical articles on the following topics:
  • changes in the processes of globalization in modern conditions
  • formation of the new world order
  • shifts in civilization at the stage of transition to a digital society

The editors are also interested in publishing synthesis articles / scientific reviews revealing the main trends in the development of certain regions of the world - Latin America, Africa, South Asia, etc.