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Very large asset owners can change the world

Leader funds usher in new era of ESG

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November 17, 2020

ASIA, November 17, 2020 – The Asset Owner 100 (AO100) – the world’s 100 largest asset owners grew by 6% last year to reach over US$20 trillion, according to research from the Thinking Ahead Institute (TAI). 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%).

Roger Urwin, co-founder of the Thinking Ahead Institute, said: “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.”

According to the research, the AO100 have become more prominent in integrating 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 framework and the SDGs2); reducing carbon emissions from portfolio holdings and investing in assets that will support the transition towards a low-carbon economy; and devising and implementing climate transition strategies that align with the Paris Agreement.

Roger Urwin said: “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.”

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).

Roger Urwin said: “Increasing numbers of the AO100 are following nation states and corporations in declaring their intention to align with the Paris Agreement and be net-zero by 2050, via their investment portfolios. This is an ambitious goal and will require new types of investment mandates that explicitly incorporate a third dimension of investment after risk and return: impact. These three-dimensional mandates (3-D mandates) will, of necessity, have to be highly innovative portfolios and engagement strategies if they are to deliver a combination of real-world impacts and improved portfolio outcomes.”

Jayne Bok, Head of Investments Asia at Willis Towers Watson, said the relative influence of asset owners compared to asset managers continues to rise, in part through the building of bigger teams with stronger leadership. “Governance is improving but has historically lagged other financial services organisations; we suggest that there are up to 20 very large asset owners globally that are well-governed, with effective cultures, providing leadership for others as a considerable force for change. The business model of asset owners is evolving, and in Asia that is happening alongside the additional challenge of managing growth while dealing with the complexity of Asian markets.”

The research also highlights other current asset owner challenges, which include: 

  • Resetting their purpose, mission and vision and consequent changes to strategy and culture
  • Streamlining governance arrangements particularly in delegations, partnering and processes
  • Developing a strong access route and strategy to investing in mainland Chinese assets.
Top 20 asset owners (in US$ million)
Rank Organisation Country Total Assets Category
1 Government Pension Investment Fund Japan $1,555,550 Pension Fund
2 Government Pension Fund8 Norway $1,066,380 Pension Fund
3 China Investment Corporation China $940,600 SWF
4 National Pension South Korea $637,279 Pension Fund
5 Federal Retirement Thrift5 U.S. $601,030 Pension Fund
6 Abu Dhabi Investment Authority1 UAE $579,620 SWF
7 Kuwait Investment Authority1 Kuwait $533,650 SWF
8 Hong Kong Monetary Authority Investment Portfolio1 Hong Kong $528,054 SWF
9 ABP Netherlands $523,310 Pension Fund
10 SAMA Foreign Holdings1 Saudi Arabia $509,884 SWF
11 GIC Private Limited1 Singapore $440,000 SWF
12 SAFE Investment Company1 China $417,845 SWF
13 California Public Employees5 U.S. $384,435 Pension Fund
14 Temasek Holdings1 Singapore $375,383 SWF
15 National Social Security8 China $361,087 Pension Fund
16 Public Investment Fund/ Sanabil Investments3 Saudi Arabia $320,000 SWF
17 Central Provident Fund Singapore $315,857 Pension Fund
18 Canada Pension2 Canada $315,344 Pension Fund
19 Qatar Investment Authority1 Qatar $295,200 SWF
20 Mercer2 U.S. $260,467 OCIO
Top 20 APAC asset owners (in US$ million)


End notes for ranking

1 As of June 30, 2020
2 As of March 31, 2020
3 As of January 31, 2020
4 As of December 01, 2019
5 As of September 30, 2019
6 As of June 30, 2019
7 As of March 31, 2019
8 Estimate
9 Global figures (ex-U.S.)
10 Global figures

Global Rank Organisation Country Total Assets Primary Category
1 Government Pension Investment Japan $1,555,550 Pension Fund
3 China Investment Corporation China $940,600 SWF
4 National Pension South Korea $637,279 Pension Fund
8 Hong Kong Monetary Authority Investment Portfolio1 Hong Kong $528,054 SWF
11 GIC Private Limited1 Singapore $440,000 SWF
12 SAFE Investment Company1 China $417,845 SWF
14 Temasek Holdings1 Singapore $375,383 SWF
15 National Social Security8 China $361,087 Pension Fund
17 Central Provident Fund Singapore $315,857 Pension Fund
25 Employees Provident Fund Malaysia $226,101 Pension Fund
26 Local Government Officials Japan $224,006 Pension Fund
32 Employees' Provident8 India $168,095 Pension Fund
36 Korea Investment Corporation South Korea $157,300 SWF
43 AustralianSuper Australia $129,095 Pension Fund
46 Labor Pension Fund Taiwan $123,655 Pension Fund
51 National Federation of Mutual Aid Japan $109,053 Pension Fund
57 Future Fund1 Australia $99,800 SWF
58 Pension Fund Association1 Japan $98,090 Pension Fund
85 Tcorp Australia $74,728 Pension Fund
86 National Public Service Japan $74,258 Pension Fund
89 Nulis Nominees (Australia) Limited6 Australia $72,200 OCIO

Notes to editors

The TAI definition of asset owners is that they:

  • Work directly for a defined group of beneficiaries/savers/investors as the manager of their assets in a fiduciary capacity (upholding loyalty and prudence) under delegated responsibility
  • Work with a sponsoring entity, usually a government or part thereof, company or not-for-profit
  • Work within explicit law and possess an implicit societal license to operate because of their societal trust and legitimacy
  • Deliver mission-specific outcomes to beneficiaries and stakeholders in the form of various payments or benefits

About the Thinking Ahead Institute

The Thinking Ahead Institute was established in January 2015 and is a global not-for-profit investment research and innovation member group made up of engaged institutional asset owners and service providers committed to mobilising capital for a sustainable future. It has 45 members around the world and is an outgrowth of the Thinking Ahead Group which was set up in 2002. Learn more at www.thinkingaheadinstitute.org.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential.

Footnotes

1 Task Force on Climate-Related Financial Disclosures

2 Sustainable Development Goals

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