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ESG Among Headwinds Facing World’s Largest Pension Funds

The politicisation of ESG, rising inflation and slowing GDP growth are among the key challenges facing large pension funds as they seek to balance short-term economic pressures and structural long-term changes, a new report says. Assets under management (AUM) at the world’s top 300 pension funds increased by 8.9% to reach a record US$23.6 trillion in 2021, according to annual research published by the Thinking Ahead Institute. The growth rate is slower than 2020’s 11.5%, but takes five-year cumulative growth to 50.2% in the period between 2016-2021. “Pension funds are under immense governance pressure from all sides, with a growing politicisation of ESG in some regions meeting calls for more substantial and urgent climate action,” said Marisa Hall, Co-head of the institute. North America now accounts for 45.6% of assets of the world’s 300 largest pension funds, up from 41.7% at the end of 2020. European pension funds account for 25.9% and Asia-Pacific 25.5%, with the remaining 4% from Latin America and Africa.

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