The onus is on the world’s biggest asset owners to solve society’s biggest issues without compromising on their financial responsibilities, according to a global think tank.
The Thinking Ahead Institute’s second study of the world’s 100 biggest asset owners (AO100) found that the world’s 100 biggest asset owners – account for US$19 trillion, up 1.7 per cent from last year.
The think tank also revealed that top 20 funds total US$10.55 trillion and represent 55.5 per cent of AO100 assets.
The study highlighted the unique position that “universal owners” of those assets have to direct capital in a sustainable way, and make a significant positive impact on issues including climate change.
The analysis found that 59.1 per cent of AO100 assets are held by pension funds, decreasing by 1.7 per cent in 2018, while 33.5 per cent are held by sovereign wealth funds (SWF), increasing by 1.5 per cent during the year, and 7.4 per cent by outsourced chief investment officers and master trusts, increasing by 0.2 per cent.
The Asia-Pacific region (APAC) remains the largest region in terms of assets under management, accounting for 36.1 per cent of assets in the ranking. The Europe, Middle East and Africa (EMEA) and North American assets represent 32.3 per cent and 31.6 per cent respectively.
“The 100 largest asset owners are responsible for over 35 per cent of all global asset owner capital. Of these, there are a number of self-declared universal owners that are large-scale, long-term and leadership-minded funds that own a slice of the whole world economy,” said the Thinking Ahead Institute’s global head of content Roger Urwin.
“This makes them pursue an influential role in safeguarding the financial system and contributing positively to certain big societal issues such as climate change.
“During 2018 there were a number of sustainability initiatives by universal owner funds that involved ‘doing good while doing well’. This marks the start of a movement in which funds support societally beneficial initiatives that are consistent with financially sound fiduciary principles. GPIF, the Japanese fund that is the largest asset owner in the world, is at the centre of a number of these initiatives”.
Australian asset owners punch above their weight
On the local front, Australian asset owners are small on a global scale, but their influence goes beyond the size of their asset base, said Willis Towers Watson Australia head of strategic advisory Jessica Melville.
“They are increasingly rising to the challenge of being universal owners, with borderless incentives to solve borderless problems such as climate change,” Ms Melville said.
“Scrutiny from local regulators has heightened the focus on value creation to their end saver – a resetting of purpose and mission, and evolving to meet the increasing regulatory burden. The profit-to-member model has been a beneficiary in the short term, which is putting pressure on business models, operating models, people models and ultimately investment models to keep pace with increased scale, complexity, and a low return outlook.
“Asset owners face lower expected returns in the future and the success with which they meet their targeted returns will be dependent on how well they adapt their investment model to integrate sustainability considerations such as ESG-related investment opportunities. Global best practice on sustainability for asset owners is on an upward trajectory, but it still has a long way to go.”
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