Assets under management at the largest 100 asset owners globally totalled $23.5trn (€20.9trn) at the end of 2020, according to the Thinking Ahead Institute (TAI), with pension funds remaining the single biggest group.

Pension funds globally accounted for 58.1% of the total top 100 assets, followed by sovereign wealth funds (24.7%) and outsourced chief investment officers and master trusts combined (7.2%). IPE recorded a 7.25% increase in overall assets for its top 1000 European pension funds sample in 2020.

Roger Urwin, co-founder of TAI, said: “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 $13trn.”

According to the Willis Towers Watson unit’s research, there are three net-zero committed organisations accredited with the Glasgow Financial Alliance for Net Zero (GFANZ) in the top 20 and only 11 others elsewhere in the top 100.

Urwin continued: “While the pledges from 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.”

However, he said that to successfully manage the complexity and challenges of sustainable investment and net zero pathways, asset owners would need to develop enhanced governance and investment sophistication.

“The need for clear-eyed strategy has never been more important”

Samar Khanna, Thinking Ahead Institute

In its research, the Institute said adopting “systems leadership”, whereby asset owners aim to have positive impacts on society and the environment as a means of securing a better outcome of which they are a part, could support innovation.

However, it noted there were impediments to this innovation, introduced for example by resourcing limits, overly conservative cultures and fragmented technology and data management.

Samar Khanna, co-author of the research, said: “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.”

Urwin said it was “decision time” for asset owners.

“They can stay in their narrow mandates or step up with a systems-leadership mindset to play a galvanising industry role that unleashes a torrent of net zero aligned capital.”

According to the Institute, Australian and Canadian asset owners had set a standard for other asset owners to emulate when it came to “a maturity model mediated by governance specialisation and investment sophistication”.

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