Universal Owners are institutional asset owners (pension funds, mutual funds, insurance companies, sovereign wealth funds) that own such a representative slice of the economy as to find it impossible to diversify away from large system wide risks. 

Neil Mitchell.“Universal Ownership recognises the role played by highly diversified asset owners (like pension schemes and insurers) in tackling global externalities such as climate change.  This reading guide provides an introduction for actuaries wishing to contribute to this evolving debate.”

Neil Mitchell

Actuary and Postgraduate Researcher in Development Policy and Management at The University of Manchester

 

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The United Nations Environment Programme Finance Initiative 2011 Universal Ownership Why environmental externalities matter to institutional investors paper.

Externalities created in one part of the portfolio will be paid for in other parts through clean-up costs, higher insurance premiums, taxes and input price costs.  It is in the interests of a Universal Owner to internalise these externalities across its entire portfolio, sacrificing profits in some sectors to benefit the whole. Universal Owners take a systems thinking view of financial returns, and recognise that, over the long term, financial returns are boosted by acting in a pro-social and pro-environmental way. 

Universal Ownership offers a ‘lens’ through which to view finance and investment.  By treating portfolio beta as endogenous, it offers an alternative to Modern Portfolio Theory.  An early paper by, Jim Hawley, one of the main proponents of Universal Ownership Theory – The Long and Short of It:  Are we Asking the Right Questions? Modern Portfolio theory and Time Horizons and is especially relevant to actuaries working in finance and investment.   

The concept of Universal Owners came to the fore in 2010/11 with a United Nations Environment Programme Finance Initiative 2011 paper.  A comprehensive guide and definition of Universal Owners can be found in Roger Urwin’s 2011 paper Pension Funds as Universal Owners: Opportunity Beckons and Leadership Calls  The Thinking Ahead Institute produces regular reports on the world’s largest asset owners, including the top 5 universal owners.  The world’s largest pension scheme, the Government Pension Investment Fund (GPIF) of Japan, and Hiro Mizuno, its former Chief Investment officer frequently talks on the subject - see this video interview Leading in extraordinary times with Hiro Mizuno 

Universal Owners are well placed to help with the profound societal challenges posed by climate change, biodiversity loss, and other sustainability issues. For a more recent summary of the issues involved, see Ellen Quigley’s two recent papers:

The challenge for the pensions industry is for other pension schemes to acknowledge their role as Universal Owners.  With more funds investing in passive indexed funds, systems beta becomes an issue for small funds too, but the costs of them taking action directly outweigh the thinly spread benefits – there is a temptation to free ride.  The theory has been described in academic circles as ‘premature’ (see Benjamin J. Richardson's paper from 2015 - Universal Investors and Socially Responsible Finance: A Critique of a Premature Theory).

However, there is a growing weight of evidence to suggest that portfolios that promote Environmental, Social and Governance (ESG) issues may perform better than those that don’t (see study Uncovering the Relationship by Aggregating Evidence from 1,000 Plus Studies Published between 2015 – 2020  by Tensie Whelan, Ulrich Atz and Casey Clark, CFA).  As pressure mounts for pension schemes and other institutional investors to act in a more pro-social way, both from their own members and wider society, more will self-acknowledge their status as Universal Owners, and will likely benefit from higher returns whilst contributing to a more sustainable future.

 

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Events calendar

  • Pensions Conference 2021

    Online webinar series
    16 June 2021 - 22 June 2021
    Spaces available

    Welcome to the programme for our 2nd Virtual Pensions Conference. This year's conference features 11 webinars offering members and non-members the opportunity to get up to date content from leading experts in the pension industry. There will also be opportunity to ask questions and contribute to the discussion.

  • Spaces available

    Mathematical Futures: The Actuary in a World Transformed – Sir Adrian Smith will outline how advances in data science, machine learning and artificial intelligence in the world of big data will transform the nature of many industries, including financial services. The broader environment within which mathematics is applied will change rapidly, often led by innovative yet disruptive forces outside. These changes will undoubtedly have an impact on the work of actuaries - and the profession will need to adapt quickly to thrive.

     

  • Spaces available

    This session will explore how the new index has revealed previously uncaptured mortality inequalities by using predictive variables at a high degree of granularity. Globally renowned leader in actuarial science Professor Andrew Cairns and his co-investigator Torsten Kleinow will demonstrate the uses of new LIFE index such as the causes of high or low mortality and regional differences in mortality.

  • Spaces available

    Given our commitment to the safety of our members and employees, and as the easing of restrictions in respect of COVID-19 cannot be guaranteed at this point in time, we have decided to hold our AGM virtually again this year.

    The Business of the AGM

  • Spaces available

    Join newly inaugurated IFoA President Dr. Louise Pryor as she explores what we need to do to keep abreast of the changing world – and how we can seize the resulting opportunities – in her Presidential Address, ‘A Learning Society’

  • Spaces available

    The world is changing. The fourth industrial revolution, globalisation and the COVID-19 pandemic are up-ending traditional social and business norms around the world; changes that were once predictable and steady are now faster and more profound.

  • Spaces available

    This is a free webinar on the consultation on changes to the Practising Certificates (PC) Scheme.

    The proposals come from a recent review of the PC Scheme which was the first substantive look at the IFoA’s approach to the requirements and process for PCs since 2010. It responds directly to feedback received on how the current scheme works especially that received from members and PC Holders.

  • Spaces available

    We have entered the global age which is invalidating most of the assumptions upon which our success up till now has depended. For example, in the global planetary society there can be no externalities. Although there is increasing clamour for new ways of thinking, sadly, our attempts to invent such new ways remain trapped in the same historical set of assumptions. The result is that we are faced with three tragedies.

  • Spaces available

    The paper “Asset liability modelling in the quantum era” shall be presented by its authors, Tim Berry and James Sharpe, and chaired by Andrew Smith, Assistant Professor in the School of Mathematics and Statistics at University College Dublin.

  • Spaces available

    Today’s breakneck pace of technological change has an immense impact on leaders—and as a result, on their organizations’ capacity to transform. All too often, executives remain stuck in outdated mindsets and modes of operating, even when they recognize the need to reinvent themselves. Leadership expert Herminia Ibarra upends traditional, introspective advice and says act first—in order to change your way of thinking. Following her presentation, Herminia Ibarra will be joined by Louise Pryor, incoming IFoA President and Hash Piperdy, Managing Director at Epitome Global, for a panel discussion around the themes of the session. The panel will be chaired by Tan Suee Chieh.

  • Spaces available

    The IFoA’s Actuarial Review Team will publish its second thematic review in June 2021. The review is looking at the involvement of actuaries in the pricing of UK home and motor insurance, during a period of significant developments in the sector from both regulation and innovation.

  • Spaces available

    As part of the Behavioural Science Series, David Rooke will explore the leadership capacities and capabilities that may enable actuaries to successfully navigate the challenges of our times. He will discuss how actuaries can apply these principles to ensure the profession succeeds, flourishes, and plays a positive societal role in our global community.

    Following his presentation, David Rooke will be joined by Stephen Mann, CEO at the Institute and Faculty of Actuaries and Anusha Thavarajah, Allianz’s Regional Chief Executive Officer, Life and Health for Asia Pacific for a panel discussion around the themes of the session The panel will be chaired by Tan Suee Chieh.

  • Asia Conference 2021 webinar series

    Online webinar series
    26 July 2021 - 30 July 2021
    Spaces available

    We have made it through 2020 but the COVID-19 crisis continues to have a significant impact on individuals, societies, businesses and the wider economy across the globe. Navigating the world post COVID-19 in an uncertain and highly unstable time brings along many uncertainties, challenges and exciting opportunities. Hence the theme of this year’s IFoA Asia Conference Webinar Series is “Risk. Adapt. Thrive.”

  • Spaces available

    Risk Management Webinar ProgrammeInternal audit is often the Cinderella of the audit world. It’s a regulatory requirement for insurance companies to have an internal audit function, so why not make it as useful as possible?  This session will look at how to link an internal audit plan to the risk register, and how that helps audit committees and boards to spot problems and fix them.