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Crisis and state investment funds with expiration dates: Risks and opportunities in a decarbonization context

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  • Juergen Braunstein

Abstract

Since the beginning of the COVID‐19 crises the establishment of new state‐owned funds with expiration dates has accelerated. This new type of fund acquires shares or silent partnerships, or it would take over other components of a company's equity. Through recapitalization, the state funds' assets grow when the injection of capital is needed and the funds shrinks during periods of economic recovery. In other words, the expiration date ensures the eventual transfer of equity stakes to private ownership. While this is a sensible choice for avoiding generous public handouts for ailing firms some unintended long‐term risks remain. Many debt and equity investments have been directed into sectors such as the automotive, energy, or aviation industries. These sectors will face increasing pressure in the future due to structural and policy‐induced changes (e.g., decarbonization efforts to reduce climate change).

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  • Juergen Braunstein, 2022. "Crisis and state investment funds with expiration dates: Risks and opportunities in a decarbonization context," Global Policy, London School of Economics and Political Science, vol. 13(4), pages 579-584, September.
    • Handle: RePEc:bla:glopol:v:13:y:2022:i:4:p:579-584
    DOI: 10.1111/1758-5899.13130
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    References listed on IDEAS

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    1. Braunstein, Jürgen, 2017. "Understanding the politics of bailout policies in non-Western countries: The use of sovereign wealth funds," LSE Research Online Documents on Economics 68472, London School of Economics and Political Science, LSE Library.
    2. Joshua Aizenman & Jaewoo Lee, 2007. "International Reserves: Precautionary Versus Mercantilist Views, Theory and Evidence," Open Economies Review, Springer, vol. 18(2), pages 191-214, April.
    3. Rodrik, Dani, 2004. "Industrial Policy for the Twenty-First Century," Working Paper Series rwp04-047, Harvard University, John F. Kennedy School of Government.
    4. Juergen Braunstein, 2017. "Understanding the politics of bailout policies in non-Western countries: The use of sovereign wealth funds," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 20(1), pages 46-63, January.
    5. Juergen Braunstein, 2017. "Understanding the politics of bailout policies in non-Western countries: The use of sovereign wealth funds," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 20(1), pages 46-63, January.
    6. Higgott, Richard, 1998. "The Politics of Economic Crisis in East Asia: Some Longer Term Implications," CSGR Working papers series 02/98, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
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    1. Alexandra França & Lucas López‐Manuel & Antonio Sartal & Xosé H. Vázquez, 2023. "Adapting corporations to climate change: How decarbonization impacts the business strategy–performance nexus," Business Strategy and the Environment, Wiley Blackwell, vol. 32(8), pages 5615-5632, December.

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