Small logo Subscribe to leading news on impact investing. Learn More
The Brief Originals Dealflow Signals The Impact Alpha Impact Voices Podcasts Agents of Impact Open
What's Next Capital on the Frontier Measure Better Investing in Racial Equity Beyond Trade-offs Impact en las Americas New Revivalists
Local and Inclusive Climate Finance Catalytic Capital Frontier Finance Best Practices Geographies
Slack Agent of Impact Calls Events Contribute
The Archive ImpactSpace The Accelerator Selection Tool Network Map
About Us FAQ Calendar Pricing and Payment Policy Privacy Policy Terms of Service Agreement Contact Us
Locavesting Entrepreneurship Gender Smart Return on Inclusion Good Jobs Creative economy Opportunity Zones Investing in place Housing New Schooled Well Being People on the Move Faith and investing Inclusive Fintech
Clean Energy Farmer Finance Soil Wealth Conservation Finance Financing Fish
Innovative Finance
Personal Finance Impact Management
Africa Asia Europe Latin America Middle East Oceania/Australia China Canada India United Kingdom United States
Subscribe
Features
Series
Themes
Community
Data
Subscribe Log In
More

Institutional Shift: Long-term asset owners move to future-proof their portfolios (podcast)



ImpactAlpha, June 4 – The same focus on financial returns that long made social and environmental issues irrelevant to major institutional investors is now making them very relevant indeed.

“The disruption to your portfolio from climate, from technology, from population growth, from urbanization – that’s coming,” says Ashby Monk, executive director of Stanford’s Global Projects Center, which facilitates collaboration among pension, sovereign wealth and endowment funds and other major institutional asset owners.

Monk joins Equilibrium Capital’s Dave Chen and ImpactAlpha’s David Bank as part of a Returns on Investment podcast series on the “Institutional Shift.”

In the podcast, Monk peers into the thinking of asset owners such as OP Trust in Canada ($20 billion), New Zealand Super ($27 billion) and Japan’s Government Pension Investment Fund (~$2.4 trillion) about climate, inequality and other risks. Such institutional asset owners, both directly and through their managers, deploy vast flows of capital as long-term stewards for retirees, citizens, students and other stakeholders.

>>MORE: European supertankers of finance chart a course to a different future

“Long-term” is the operative phrase.

“I don’t view ESG (for environmental, social and governance factors) as anything other than a long-term risk management tool,” Monk says. “If I’m a $2.4 trillion public pension plan, I’m assuming that much of these assets are going to be around for many decades, if not centuries. So you’re taking a long-term view, and ESG is a great way of doing that.”

Helping move the debate is what Ashby calls the “herd mentality” of institutional investors, “I like that term impact alpha,” he said. “Anywhere investors see alpha, there’s going to be money chasing it.” He cites the example of Temesek, the $200 billion sovereign wealth fund of Singapore, which has delivered high-teens returns over four decades. “If you are using an impact lens to do that, so much the better — you can have some positive effects and externalities for the broader world.”

>>MORE: Institutional investors come for the risk reduction, stay for the impact 

The immediate wedge, Monk says, is the growing realization among asset owners of the high fees and costs associated with conventional approaches to private-equity and hedge-fund investing. “All of a sudden, we get these pension funds asking a very important question: Is there another way? It’s in that moment that we can move the supertankers.”

“The beauty of focusing on the asset-owner community is that if you can even move them even one or two degrees off their north star, you’re going to move trillions of dollars.”

 

You might also like...