Very large asset owners can change the world

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[{"type":"text","content":"Leader funds usher in new era of ESG\nARLINGTON, Va., Nov. 16, 2020 (GLOBE NEWSWIRE) -- The Asset Owner 100 (AO100) — the world’s 100 largest asset owners — grew by 6% last year to reach over $20 trillion, according to research from Willis Towers Watson’s Thinking Ahead Institute. Pension funds remain the single biggest group of asset owners accounting for over 60% of assets, followed by sovereign wealth funds (32%) and outsourced chief investment officers (OCIOs) and master trusts combined (7%).\n “With responsibility for over one-third of all asset owner capital globally, the AO100’s influence on other investors and society is growing and becoming more important,” said Roger Urwin, co-founder of the Thinking Ahead Institute. According to the research, the AO100 have become more prominent in integrating environmental, social and governance (ESG) and being more active owners, including aiming for real-world impacts in their investment strategies. These strategies increasingly include new elements, such as factoring in member views, adopting new investment benchmarks, reporting on the impacts of their investment strategies (via the TCFD1[1] framework and the SDGs2[2]), reducing carbon emissions from portfolio holdings and investing in assets that will support the transition toward a low-carbon economy, and devising and implementing climate transition strategies that align with the Paris Agreement. “At the larger end of the AO100, funds are pursuing so-called universal owner strategies, which contribute to safeguarding the financial system and addressing other systemic risks, including climate change, without sacrificing risk-adjusted returns. This is consistent with a new era of ESG — which we call ESG 3.0 — that is fundamentally different from previous versions in that it includes real-world impacts on the environment and society while delivering better outcomes for beneficiaries,” said Urwin. The research indicates that universal owner strategies are highly collaborative and involve working through industry groups, such as the Principles for Responsible Investment (PRI) and Net-Zero Asset Owner Alliance, and improve long-term financial outcomes, through beta (market return) rather than alpha (securities relative return). “Increasing numbers of the AO100 are following nation states and corporations in declaring their intention t...

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