Asset owner rankings

Bridging the development finance gap at the upstream end of the investment chain

UNCTAD has been monitoring and ranking the world’s top asset owners, mainly pension and sovereign wealth funds, in terms of their sustainability integration and performance.

As the world’s largest asset owners with a relatively long investment horizon, public pension funds (PPFs) and sovereign wealth funds (SWFs) are in a unique position to effect changes in sustainability integration along the investment chain.

The UN scorecard tries to evaluate the sustainability integration performance of the world’s top 100 funds by AUM (70 PPFs, 30 SWFs), which own $22 trillion of assets under management (AUM).

In 2021, 47 funds published an ESG/sustainability report or reported significantly in their annual report, accounting for 36% of global PPF AUM and 23% of global SWF AUM.

More than half of these funds (53) do not report on sustainability integration, including funds from both developing and developed economies.

The regional distribution may point to the regulatory impact on reporting trends as well as corporate practices.

The top funds in 2021, ranked by sustainability performance

The ranking covers six reporting areas (governance and resources, policies, ESG investment strategies, climate action, ESG integration along the investment chain and evaluation and reporting. Click here for an explanation of the numbered reporting areas). The numbers on the bottom are the percentages of funds reporting on that metric: red signifies that less than half of funds report; green signifies that at least 9 out of 10 funds report.

ESG integration matrix for 47 public pension and sovereign wealth funds (ranked by sustainability performance)

ESG integration matrix for 47 public pension and sovereign wealth funds (ranked by sustainability performance)

The strongest and weakest areas of performance in 2021

Funds performed well in several areas of sustainability integration, including governance, policies, investment strategies and ESG integration along the investment chain. Additionally, for evaluation and reporting, it should be noted that 8 out of 10 funds use an international reporting framework on sustainability, such as TCFD. Funds performed less well in some aspects of governance, monitoring and reporting and alignment with the SDGs. In general, there is a large variance in reporting, as no widely accepted reporting framework exists for asset owners/managers

Strongest areas weakest areas

The UNCTAD Sustainability Integration Framework for Institutional Investors

Based on the best practices and lessons learned from the efforts of the frontrunner funds on sustainability integration, UNCTAD proposed a framework for other funds.
Action areas
Concrete action items
I - Formulate a new generation of company values and mission aligned with sustainability

• affirm commitment to sustainability integration.

• adopt long-termism;

• treat ESG and SDG integration as an opportunity.

• pursue triple bottom lines (financial, social, and environmental)

II - Put robust governance, policies and processes in place that are aligned with sustainability

• engage all players from the Board to portfolio managers in sustainability mainstreaming, with well-defined roles and responsibility.

• formulate company policies on sustainable investment.

• set up a dedicated team to coordinate ESG integration efforts.

• establish clearly defined internal processes for sustainable investment.

III - Take a holistic approach to ESG integration

• mainstream sustainability throughout the entire investment process, from due diligence to after investment.

• identify key action areas and develop coherent sustainable investment strategies (exclusion, ESG integration, positive screening, thematic investment, SDG investment or a combination of them).

• formulate a comprehensive strategy for SDG integration and move from process-based responsible investment to sustainability-dedicated investment to enhance impact on the ground.

IV - Integrate sustainability along the investment value chain

• exercise voting rights directly or through proxy voting.

• engage with asset managers, portfolio companies and the society on sustainability issues.

• publish sustainability guidance or requirements for asset managers, portfolio companies, service providers (such as proxy voting companies) and other stakeholders.

V - Measure sustainability risks, impact, and performance

• assess and forecast material ESG or sustainability risks.

• set evidence-based sustainability goals, and cascade down to asset managers.

• measure sustainability performance, including SDG performance, with qualitative and quantitative KPIs.

VI - Publish a high-quality sustainable investment report annually

• ensure thoroughness, balance, and clarity in reporting.

• refer to internationally adopted reporting framework(s) with necessary adaptation to enhance consistency and comparability.

• use external auditing

VII - Partner with peers and international initiatives

• acquire and develop knowledge and expertise.

• develop industry norms and standards.

• advocate sustainable investing policies or practices (e.g. through collective engagement campaigns targeting companies in priority sectors).

For more detailed information about the ranking and UNCTAD’s work on sustainability integration by the world’s top asset owners, please download our latest publication.

Legend for the 25 reporting areas of the ESG integration matrix

Governance and resources

1Does the fund clearly state its vision, mission or mandate on sustainable investment?

2Does the fund set any overall targets/goals on sustainable investment or asset allocation in its vision/mission statement on ESG?

3Is there any dedicated team established to coordinate ESG/SDG investments?

Policies

4Has the fund put in place an internal policy or guidelines regarding ESG/SDG integration?

5Is any international ESG/SDG-related standard, taxonomy or benchmark employed in the investment decision making process?

6Does the fund provide clarity on efforts it has made to meet relevant national/regional/international ESG-related regulations?

Investment strategy

7Exclusion: does the fund use ESG-based negative screening/exclusions in its investment decisions?

8General integration: does the fund incorporate ESG considerations systematically in its investment decision making process?

9Positive Screening: does the fund use any positive or best-in-class screening related to ESG in its investment decision making process?

10Impact investment: does the fund target ESG-oriented sectors (e.g., renewable energy, green housing) or ESG-related capital market instruments (e.g., green bonds, ESG funds) or relevant markets (emerging and developing economies)?

11SDG investment: does the fund consider SDGs in its investment decision making process or asset allocation?

12Social: Does the fund integrate the social dimension of sustainability into its sustainable investment strategy? (e.g. child labour, diversity, etc)

13Governance: Does the fund consider governance issues in its investment decisions? (eg, executive pay, board diversity, tax, etc)

Climate action

14Does the fund have a specific strategy on climate or CO2 emissions?

15Does the fund undertake climate risk reporting and publish a climate risk report?

16Does the fund use any target or goal (carbon emissions, green investment, or asset allocation)?

17Does the fund monitor and report with specific metrics?

18Is the fund part of any international climate response initiative?

ESG integration

19Does the fund have any active engagement activities (e.g., consultations, dialogue) with any stakeholder in the investment value chain?

20Does the fund actively exercise its voting rights in its portfolio companies, including through the use of a proxy?

21Is there any policy, guidance or requirements on ESG (and SDG) integration provided to asset managers and/or investees/portfolio companies?

22Is there any training provided for asset managers/portfolio companies?

Monitoring, evaluation, and reporting

23Does the fund monitor and evaluate its ESG/SDG performance with specific metrics?

24Does the fund use any international reporting framework or guidelines as a framework to report on sustainability issues?

25Is ESG/SDG impact audited or certified by an external party?

Source: UNCTAD

All enquiries about the Observatory’s activities becoming a member of SDG Investors can be directed to UNCTAD’s Division on Investment and Enterprise:Contact us