In this In October, TIIP added 15 investor profiles to our growing database of asset owners and managers focused on system-level investing. TIIP’s online database and research portal are gateways into the world of system-level investing for investors. These resources help investors reduce manager and advisor search costs, create or refine strategies to win business, increase competitiveness and preserve long-term returns, and stay informed on the latest trends in system-level investing. These profiles join the many other investor profiles already in the database.
Below we share highlights from the pension plans, insurance companies, and endowments and foundations that are among the newly added profiles.
Pension Plans: Highlights
Climate change. The newly profiled pension plans utilize a variety of strategies to address and manage climate change risk, which they see as a material threat to the long-term solvency of their investments. They invest in targeted investment programs (ex. green bonds or climate solution funds); set investment standards to abstain from environmentally harmful sectors; influence climate policy regulations through political engagement; and build and participate in international organizations that work to advance climate change dialogue. Varma (download here) and the Fourth Swedish National Pension Fund, for example, have set asset-class specific carbon reduction targets, and the Construction and Building Union Superannuation fund of Australia is a founding member of the Investor Group on Climate Change (IGCC).
ESG Integration. Typically, pension plans take a long-term investment approach. The Government Pension Investment Fund in Japan, for example, considers itself a “super long-term investor” with a 100-year time horizon. Many of those newly profiled pension plans integrate, environmental, social and governance (ESG) considerations into their security selection and portfolio construction to enhance their risk/return evaluations and to promote the success and stability of investments over the long-term. ATP Group of Denmark uses an ESG analysis framework to evaluate ESG impacts, risks, opportunities within prospective investments, and Government Employee Pension Fund of South Africa uses a proprietary ESG matrix of its local investments that it uses to guide its corporate engagements.
Insurance Companies: Highlights
Extreme weather events caused by climate change (e.g. droughts, floods, and catastrophic storms) pose serious risks to insurance companies. As is the case with pension plans, the newly profiled insurance investors integrate ESG considerations integration into their investment practices to mitigate risk and enhance long-term value, and to identify investments focused on strengthening the resilience of the environmental system that affects all aspects of their business in fundamental ways. Each also uses collaboration advance discussion and knowledge-sharing about climatic sub-themes like resilient energy infrastructure, renewable energy, food security, risk-transfer solutions and flood impact measurement. Swiss Re (download here), for example, established its Center for Global Dialogue to foster multi-disciplinary, international partnerships to design strategies for systemic resilience.
Endowments and Foundations: Highlights
Impact investing is consistent with the foundational values of endowments and foundations. All of the newly profiled foundations and endowments – McKnight Foundation (download here), Omidyar Network and Rockefeller Brothers Fund – use solutions funds to generate targeted environmental and societal impact. Through such funds, they invest in: renewable energy, wetland preservation, affordable housing, climate change solutions, financial inclusion, sustainable land use, water scarcity solutions and education. In some cases, these endowments and foundations intentionally invest in underserviced areas of the market to achieve the desired impact, like Omidyar, who published a report in 2015 making the case for investments in underserved populations in emerging markets and allocated $400 million in investment and grants to organizations adding societal infrastructure and internal capabilities to emerging markets.