The responsible investment practices of the world's largest government-sponsored investment funds

This chapter studies the factors that increase the propensity of government-sponsored investment funds (GSIFs) to integrate environmental, social and governance (ESG) considerations, into their investment decision-making process. Over the last 30 years, the increased utilization of financial markets as a repository of national and personal savings has led to a domination of the financial markets by large institutional investors ( Gray, 2009 ). The most important class of institutional investors are public pension funds given their broad constituencies and their long-term investment horizon ( Clark & Hebb, 2005 ). In recent years, another class of GSIF has also emerged in global finance: sovereign wealth funds (SWFs). Indeed, at the end of 2012 pension funds were the most important class of global investors with $33.9 trillion 1 in assets under management (AUM), whereas sovereign wealth funds cumulated $5.2 trillion in AUM ( The City UK Research Centre, 2013 ).