European pension and state funds dominate 2021 global responsible investor list

Norway’s trillion-dollar Government Pension Fund Global, Italy’s CDP group, APG and six asset owners from Europe received perfect scores for their responsible investment practices according to an index of leading state-affiliated responsible investors. 

The top-scoring group also include UK local authority pension fund LGPS Central, French public sector pension scheme ERAFP, PGGM, ATP, PensionDanmark and Caisse des Depots Groupe.

Overall, 16 asset owners from Europe – including Ireland’s sovereign wealth fund and two other UK local authority pension funds – were listed in the 30-strong global index, which is published every two years by the Responsible Asset Allocator Initiative (RAAI). 

Outside Europe, Californian public pension giants CalPERS and CalSTRS, New York State Common, Canada’s CDPQ, South Africa’s Public Investment Corp and Japan’s GPIF secured spots in the index, which is billed as setting “a global standard for leadership in responsible investing”. 

A total of 251 sovereign wealth funds and government pension funds – representing $26trn in assets – were assessed for inclusion into the RAAI index in partnership with US university Tufts.

Funds were rated against 10 principles and 20 criteria, predominantly related to the disclosure of investment and ESG policies and performance. They were also assessed on their memberships of responsible investing organisations such as the PRI.  

Schemes were judged on whether they invest and apply ESG practices within emerging markets – an issue of growing importance, as emerging markets have so far failed to attract the public and private investments needed to build out Net Zero economies.

The 30 leaders identified within the RAAI Index met at least 29 out of the 30 assessed criteria, scoring an average of 98 points. Funds which met at least 28 of the criteria were listed in the RAAI ‘finalist’ group which included NYC Retirement Systems, Canada’s OMERS, Australia's Sunsuper and Korea’s National Pension Service.  

Members of the Finalist group, 22 in total, scored an average of 93 points. 

However, RAAI noted a “stark difference” between the responsible investing practices of the 52 top allocators and the remaining 199 funds assessed – the latter of which only scored an average of 40 points against RAAI’s criteria. 

“These are relatively straightforward criteria, and it is surprising that the majority of world funds rate poorly on them, in the opinion of the reviewers,” the Initiative remarked. 

The RAAI is a project of the New America public policy thinktank and looks at how major financial institutions address broader social and environmental challenges. 

The publication of the Index comes soon after research from Willis Towers Watson revealed that only 11 out of the largest 100 asset owners globally had adopted Net Zero targets.