ASSET OWNER STRATEGY GUIDE: HOW TO CRAFT AN INVESTMENT STRATEGY by Xander den Uyl and Kris Douma

ASSET OWNER STRATEGY GUIDE: HOW TO CRAFT AN INVESTMENT STRATEGY by Xander den Uyl and Kris Douma

FOREWORDS

LONG-TERM RESPONSIBLE 
INVESTMENT STRATEGIES ARE HERE 
TO STAY
When the PRI published its discussion paper on asset owner 
investment strategy— Crafting an Investment Strategy—
they declared that even though many asset owners have 
made commitments to responsible investment, there is still 
insufficient work to embed sustainability into institutional 
investment strategy.
Asset owners need to get back on the “front foot” when 
it comes to their investment strategy. While the global 
macroeconomics and political economy continue to send 
mixed signals, it’s more critical than ever that asset owners 
demonstrate a sound and considered investment strategy 
that takes environmental, social and governance (ESG) 
issues into account to maximise long-term investment 
performance and better manage risk and, often, beneficiary 
expectations.
Since the discussion paper was published, there have been 
new industry initiatives that support consideration of ESG 
issues. For example, asset owners now have guidance 
from the recommendations of the Financial Stability Board 
(FSB) Task Force on Climate-related Financial Disclosures 
(TCFD). The TCFD recommendations are designed to help 
companies and investors understand and manage climate-

related risks. 
When it comes to industry players leading by example, the 
world’s largest asset owner GPIF recently announced that 
they had included ESG in their investment principles. Such 
an announcement sends a strong signal about the systemic 
importance of ESG as a creator and preserver of value. 
Alongside these developments, the market momentum 
for a more long-term responsible investment approach 
seems unstoppable. Having followed the ESG / SRI market 
for more than a decade, the past 18 months has felt more 
like a tipping point, the time when responsible investment 
finally arrived onto the front pages of the financial press and 
became “mainstream.”
Given the direction of travel, a sound investment strategy 
is one that assesses long-term sustainability issues and 
understands how global megatrends will shape our future 
investment environment. It is not a tick-box exercise but 
rather, a fundamental starting point to investment decision-

making that improves risk management and maximizes 
returns for current and future generations of beneficiaries.

EVOLVING INVESTMENT STRATEGY 
CONSIDERATIONS FOR BOARD 
MEMBERS AND EXECUTIVES
Over the last few years, it has become obvious that taking 
material ESG issues into account in investment strategies, 
decisions and active ownership is not against, but an 
integral part of an investor’s fiduciary duty, which requires 
investors to act in the interest of the ultimate beneficiary. 
This requires that responsible investment and incorporation 
of ESG issues is not a ‘nice to have’ overlay, but should be 
firmly integrated in an asset owner investment strategy. 
Asset owners, who sit at the top of the investment chain, 
have it in their power to communicate to managers and 
other stakeholders how critical ESG is to addressing 
systemic risks such as climate change. Climate change 
presents serious material risks for investment portfolios, 
and, in the wake of the Paris Agreement, it’s vital that 
investors engage with the companies in their portfolios to 
see how they plan to transition to a low carbon world. 
The recommendations by the Financial Stability Board 
(FSB) Task Force on Climate-related Financial Disclosures 
(TCFD), announced last June, provide a framework for 
ensuring transparency on how companies are dealing 
with climate change. We urge all investors to adopt the 
recommendations. 
Given their long-term investment horizon, asset owners 
are well placed to use ESG factors to build value for 
their beneficiaries. In order for this to happen, it is vital 
that asset owners develop clear ESG investment goals 
and ensure those goals are supported throughout their 
organisation. While progress on ESG-focused investing is 
not materializing as quickly as we would like, the signals that 
we are seeing in the market tell us that things are moving in 
the right direction. 
At the same time new challenges arise. Increasingly, 
beneficiaries and society in general expect investors to 
contribute to ‘broader objectives of society’, as they were 
originally called in the PRI preamble. The UN Sustainable 
Development Goals, launched in 2015, provide a global 
framework for these broader objectives of society. 
Investment strategies move beyond incorporation of ESG 
in Risk and Return and include a third ‘R’: asset owner 
expectations of Real-world impact, aligned with the SDGs.

We are living in exciting times, when asset owner strategies 
are required to focus on managing ESG-risks, seeking 
sustainable investment opportunities to create good 
financial returns and contribute to solutions for major 
problems in our global society. This Strategy Guide hopefully 
helps asset owners on that journey.

ASSET OWNER STRATEGY GUIDE: HOW TO CRAFT AN INVESTMENT STRATEGY by Xander den Uyl and Kris Douma