Unlocking over $23 trillion, held by the top 100 asset owners globally, is key to reaching net zero targets, according to research by the Thinking Ahead Institute (TAI).
Capital held by the group grew by 15.7% last year, climbing to $23.5 trillion, and pension funds remain the single biggest group of owners globally, accounting for 58.1% of assets, followed by sovereign wealth funds, which account for 34.7% and outsourced chief investment officers (OCIOs) and master trusts account for a combined 7.2%.
Europe, the Middle East and Africa (EMEA) regions are responsible for a total of 31.4% of assets, with Norway’s Norges Bank Investment Management holding $1.3 trillion, making it the second largest asset owner globally.
“This relatively small group of investors are right on the front line of the investment community’s fight to become net zero, and their power is even more concentrated among the top 20, which are responsible for nearly $13 trillion,” said Roger Urwin, co-founder of the Thinking Ahead Institute.
“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,” he added Urwin.
Within this grouping, there are just three accredited net zero committed organisations in the top 20 and only 14 in the top 100.
And while the development of systems-leadership practices is set to support innovation and collective action on climate, asset owners will need to overcome narrow interpretations of fiduciary standards in order to make a real difference on climate, according to the research.
“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,” said Urwin.
Samar Khanna, co-author of the research, added: “The challenges asset owners face are immensely broad and deep. We are concerned that the resources of the sector will be stretched by having so many strands to cover. The need for clear-eyed strategy has never been more important.”
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