Pension funds remain biggest asset owner group with 58.1% share - TAI

Pension funds remain the single biggest group of asset owners globally with a 58.1 per cent share, according to the Thinking Ahead Institute (TAI).

New research by the TAI found that the world’s 100 largest asset owners’ total assets grew by 15.7 per cent last year to reach USD 23.5trn. Sovereign wealth funds followed pension funds in terms of group size, with 34.7 per cent of assets, before Outsourced Chief Investment Officers (OCIOs) and Master Trusts combined (7.2 per cent).

TAI co-founder, Roger Urwin, believes the group is on the “front line” when it comes to the investment community’s fight to become net zero. “Their power is even more concentrated among the top 20, which are responsible for nearly USD 13trn. According to the research, there are three accredited net-zero committed organisations in the top 20 and only 14 in the top 100.

“While the pledges from Glasgow Financial Alliance for Net Zero (GFANZ) organisations are critical, the largest asset owners hold the ‘keys to the castle’. Their allocations, ownership muscle and trickle-down influence will be important in opening the door to net zero pathways. But to successfully manage the complexity and challenges of sustainable investment and net zero pathways, asset owners will need to develop enhanced governance and investment sophistication,” Urwin said.

“The Glasgow COP summit has highlighted how asset owners can work together as part of a wider collaboration framework to produce better long-term outcomes for the whole system.”

According to the research, the development of systems-leadership practices – those that acknowledge the size and interconnectedness of the climate challenge – will support much-needed innovation and collective action. However, asset owners will need to face up to and overcome numerous impediments, including narrow interpretations of fiduciary standards, that have pushed them to maintain established practices.

“The research highlights how some asset owner groups have attempted to overcome these impediments by ‘maturing’ their governance, investment and sustainability models and revamping their organisational purpose. As part of this they have built their capacity to innovate in readiness for the imminent transformational change, and other asset owners should take note.”

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