Economic, social and corporate governance (ESG) factors constitute material risks as well as business opportunities for institutional investors, such as public pension and sovereign wealth funds (SWFs). As “universal owners” with large shareholdings in companies across a huge range of sectors and markets, these funds are in a unique position to drive ESG inclusion along the investment chain through active and responsible ownership.
Among the world’s 50 largest public pension funds and 30 largest SWFs, the report finds that only 16 public pension funds and 4 SWFs published a sustainable or responsible investment report in 2019. This shows that these institutional investors still have a long way to go on ESG integration 15 years after the creation of the Principles for Responsible Investment (PRI).
By reviewing the annual sustainable investment reports of these 20 frontrunner funds, this study identifies a rich pool of good practices for sustainability integration in five strategic areas: governance, corporate sustainable investment policies, sustainability integration strategies, ESG integration along the investment chain, and evaluation and reporting.
The study also proposes a framework that can be used by asset owners and managers to act on sustainability in-line with their operational model and strategic priorities.