Pension Funds as Universal Owners: Opportunity Beckons and Leadership Calls

Abstract

Universal owners are asset owners who recognize that through their portfolios they own a slice of the whole economy and the market. They adapt their actions to enhance the return prospects of their portfolios, and hence the prospects for the whole economy and the market as well. This approach is a logical but ambitious interpretation of investing sustainably. Universal owners focus their actions particularly on active ownership practices and active investment strategies that integrate environmental, social, and governance considerations. They also collaborate with other asset owners to produce network benefits. Externalities such as resource degradation and depletion, greater complexity, and connectedness make the methods of universal owners increasingly important. The challenge now is to adapt the roles of the state and the market. By fostering a better-balanced collaboration between the two, universal owners would increase both their legitimacy and effectiveness in pursuing actions that are value-enhancing for their beneficiaries and for society.

Note: PROC ab onlY May 3, 2011 CINdy

Keywords: Asset Owners, Externalities, Pension Fund, Sustainable Investing, Universal Ownership