According to research by the Thinking Ahead Institute, unlocking over $23trn of capital from 100 of the world’s largest asset owners will be crucial to achieving net zero targets.
Roger Urwin, co-founder of the Thinking Ahead Institute (TAI), stated: “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.”
The TAI reports that pension funds continue to serve as the largest asset owner worldwide, accounting for over 58% of total assets. Sovereign wealth funds follow (34.7%), then outsourced CIOs and master trusts (7.2%). The world’s 100 largest asset owners held $23.5trn in capital last year, an increase of 15.7%. However, the TAI’s study reveals that there are only three accredited net zero organisations among the top 20 asset owners, and 14 in the top 100.
Urwin went on to say: “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.”
“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.”
Researchers concluded that developing a culture of systems leadership that acknowledges the size and interconnectedness of climate change can lead to “much-needed” innovation and collective action.
The TAI Co-founder stressed how “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 and architecture.
“As part of this they have built their capacity to innovate in readiness for the transformational change that is imminent and other asset owners should take note.”
If an influx of net zero aligned capital is released, it could not only have unprecedented impacts on progress towards a net zero world but also boost revenue streams in the long run. Realising net zero will require us all to make changes and to adapt to new ways of working, but it also presents an exciting opportunity for businesses looking to stay competitive as they drive innovation and growth.
For firms, the time is ripe to embark on their sustainability journeys and future-proof themselves against future challenges, because ultimately, what makes more business sense than securing our future?
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