They are the opposite of day-traders. They hold the sovereign wealth of their countries, the life savings of their pensioners. They are entrusted to manage the capital for their stakeholders, for the long-term. And they are so large, so invested in every industry and every geography, that they have no escape from the escalating dislocations of climate change and income inequality. When you “own the universe,” there are no externalities.

That huge pension and sovereign-wealth funds would lead the capital markets’ rotation toward social and environmental value-creation would have seemed laughable even five years ago. Now, as some of the world’s biggest asset managers change course, it seems almost inevitable.

The potential for universal owners to shift the tide of global capital has for years had strong, shall we say universal, appeal. Until now, it hasn’t been clear how to operationalize it. The Sustainable Development Goals have provided a starting point, a center of gravity around which the whole apparatus of global finance can do its thing. New America is transparent about its intentions to “unlock at least $250 billion in new resources to address challenges such as climate change, disease, bad governance, and weak infrastructure” in line with the SDGs.

The Bretton Woods II project suggested three “alternative choices” that large-scale asset-allocators might make:

  • Emphasize the long-term.
  • Engage and cooperate.
  • Make external managers allies on sustainable investing.

Read the full article by David Bank about wealth funds from ImpactAlpha