The California Public Employees’ Retirement System, Japan’s Government Pension Investment Fund, and the Ontario Teachers’ Pension Plan are among some of the most responsible asset allocators in the world, according to a new ranking.
The Responsible Asset Allocator Initiative at New America released its latest ranking of sovereign wealth funds and government pension funds based on socially aware and environmentally-focused investing practices this month. This is the second publication of the ranking, which was first released in 2017.
The group evaluated 471 allocators, ultimately analyzing 197 funds comprising $21 trillion in assets — up from 121 ratings in 2017. A resulting list of the top 25 was published by the Responsible Asset Allocator Initiative, which was founded at New America, an organization dedicated to tackling the challenges caused by rapid social and technological change.
This year’s ranking included Canada’s Caisse de dépôt et placement du Québec, the Canada Pension Plan Investment Board, California State Teachers' Retirement System, PGGM, UC Regents Investment Funds, and others. The study was developed with the Fletcher School at Tufts University, according to the Responsible Asset Allocator Initiative.
“Increasingly, the asset allocator community is recognizing that investing responsibly and sustainably is a better way to optimize returns, reduce risks, and identify opportunities for future growth, all while aligning portfolios with broader social and environmental concerns of stakeholders,” said Scott Kalb, founder and director of RAAI and chairman of the Sovereign Investor Institute, which is a part of Institutional Investor, in a statement accompanying the report.
The ranking of asset allocators was based on ten core criteria, according to the report. These included disclosure, intention, clarity, integration, implementation, and commitment, the report said.
The report recommends that institutions start trying to make changes with low hanging fruit. “When it comes to implementation, begin with the tasks that are easiest for your organization,” it said. The report added that introducing ESG into the due diligence process for private equity could be a “quick win” for allocators.
“The process already exists, you simply need to define additional criteria and standards,” the report said.
And while the report highlighted ways allocators could make changes, it cautioned investors to stay focused on the purpose of sovereign wealth or government pension funds, rather than trying to save the planet.
“Your work should always be aligned with the financial objectives and goals of the fund,” it said.