In September, the board of the $28 billion West Virginia Investment Management Board agreed to divest Chinese state-owned companies from its portfolio, six months after the motion was put forward by Governor Patrick Morrisey who called the Chinese Communist Party “our biggest geopolitical foe” posing “a national security risk to West Virginians and Americans”.

With an effective exposure of around $77 million, chief investment officer Craig Slaughter says the divestment’s impact will be “de minimis” but he has reservations about the decision for a couple of reasons.

He says it is one of the rare occurrences where a motion was approved by the board without staff or consultant endorsement. It is at odds with the fund’s long-term approach whereby individual managers are given the discretion to make specific investment decisions with the fund handing out broad mandates.

Two external managers, Axiom Investors and Numeric Investors, look after the fund’s emerging markets allocation where most of the Chinese exposure sits. Slaughter says those managers can handle the change without significant disruption, for example, by replicating the same beta in a portfolio without state-owned entities. Ultimately, how the $77 million will be reinvested is up to the managers.

“For us to overlay our opinion on that [mandate] assumes that we have a better understanding than the managers of what the risks and rewards are with respect to those geographies,” he tells Top1000funds.com in an interview from the fund’s Charleston office.

“Conceptually, it just doesn’t make sense for us to do that, unless we did it all the time.”

With $550 million in Chinese listed equities as of June 2025, China was the fund’s largest single country exposure outside of the US, accounting for 13 per cent of the $3.2 billion international equities allocation.

State-owned entities are generally not the most attractive companies in China but occasionally valuations can make them attractive buys, Slaughter says.

While the basis for excluding China might be ideological or its capital market structure, he believes there are plenty of other countries which share similar issues.

“Are we going to divest from all these other places too? If the answer is yes, and I do believe some of my peers have done something like that, then that would be intellectually consistent,” he argues.

“But not to do it and just choose one geography [to exclude] seems to be logically problematic.”

The China divestment directive came from Governor Morrisey who not only sits on the 13-person board, but also appoints the 10 members who are not elected officials.

The bigger issue

Slaughter voiced similar concerns around the independence of retirement plans in 2023 when West Virginia’s Republican government introduced legislation limiting the WVIMB’s discretion with regard to proxy voting to foreclose any consideration of ESG criteria. [See The politicisation of investments at US public funds].

Slaughter sees the China divestment directive as tangentially related to the biggest long-term threat currently facing investors: a “decline in liberal democracy, which means a decline in the vitality of capitalism. That ultimately means less wealth for everybody”.

“Liberal democracy limits State power over private rights. The integrity of those limits is critical to capital as much as to individuals,” he says.

“Any uncertainty in the application of the rules of this [liberal democracy] system makes it less efficient. Less efficiency means less production and less wealth.

“We’ve seen a decline in liberal democracy around the globe, including the US,” he says. One manifestation of the risk is when corporations that have operations in the US stop investing capital and growing their operations because rules around trade and foreign investments are changing “in a chaotic fashion”, Slaughter says.

Companies that have been heavily reliant on global supply chains have been hit in the past year, due in part to President Trump’s volatile trade policies. For example, Nike and Ford have projected billions of dollars in losses from US tariffs in their latest earnings.

“I would expect that a lot of companies are sitting on their hands because they don’t know where things are going,” Slaughter says.

With that said, Slaughter is not planning on making significant changes to the asset allocation. The fund does not manage any capital in-house, leaving micro-level security selection decisions to external managers, while it focuses on the macro-level decisions with a focus on the long-term.

“We rely on equity exposure to generate return over the long run, and we plan to stay with it. We’ve consistently maintained more or less the same strategy for many, many years. The movement away from liberal democracy is a structural problem that will play out over the long term, most likely impacting markets at a somewhat glacial pace,” he says.

Managing market volatility is, for the WVIMB, really about managing stakeholder expectations, in Slaughter’s view. The fund invests on behalf of some 25 pension plans, insurance funds and endowments among which the biggest is the $10 billion Teachers’ Retirement System.

“Our view is if we can maintain our strategy over the long term, we’ll be winners. When markets are exceedingly difficult for a long period it is a challenge but one we think we can manage.

“My message would be that, as investors, we can probably expect lower returns if this decline in liberal democracy and the efficiency of capitalism persists. We try to make sure that stakeholders know that, so that if things do go south and stay that way for a while, we can manage expectations and maintain the portfolio until things change.”

Investors that focus on decarbonising their portfolios won’t change real world decarbonisation and would have more impact on climate change by buying transition investments.

In a recent report, The Policy Challenges of the Energy Transition, the investment team at £76.8 billion USS Investment Management which oversees the main pension scheme for the United Kingdom’s university and higher education sectors, together with Transition Risk Exeter, a commercial spin-out from Exeter University, argue that asset owners should focus most on collaborating and engaging at a macro level with governments and regulators to help to bring about policy change, rather than spend time on reducing portfolio emissions.

The easiest way for investors to reduce emissions from their portfolio investments is to sell high-emitting assets to other owners. But this does nothing to advance the low carbon transition or reduce the systemic risk of climate change that threatens all investors’ long-term returns, argues the report which endorses comments that USS chief investment officer Simon Pilcher shared with Top1000funds.com earlier in the year.

Moreover, emissions are a lagging indicator. In contrast, investment in renewables like solar and wind and clean technology where USS invests around £2 billion, is a leading indicator of the low carbon transition.

an urgent need for action

Climate change brings complex risks for investors. For example, it is non-linear in nature so a small increase in an underlying variable such as global temperature, or sea level, which changes gradually over time, can lead to a large increase in the probability of an extreme event, driving up risk.

“A fundamental mistake is to assume that any effect on the economy must be marginal, involving only small changes within the existing system, rather than recognising that it is system stability that is at stake,” states the report.

Nor do climate risks tend to have normal distributions: the likelihood of extreme impacts can be relatively high, or unknown, meaning that expected values often cannot be meaningfully calculated.  Research by Norges Bank Investment Management similarly highlighted the challenge of reconciling the order of magnitude of climate risk exposures using top down vs. bottom-up approaches.

Instead, climate risk assessments should focus on identifying plausible worst-case outcomes for assets, supply chains, or regions of interest, and working backwards to assess their probabilities.

Government leadership

For the energy transition to continue and accelerate, governments must create the right conditions for clean technologies to replace fossil fuels.

“Only decisive action by governments can substantially reduce these risks and accelerate the growth of the clean energy economy,” states the report.

In the UK, this requires specific actions.

Early-stage policies should include support for research and development of new technologies, and measures such as targeted subsidies and public procurement to enable their first deployment.

In the middle stage of a transition, regulations can be even more powerful in driving the reallocation of investment on a large scale. For example, zero emission vehicles (ZEV) mandates have proven outstandingly effective in growing markets for electric vehicles in California, Canada and China. Yet in the UK, demand for electric cars is constrained by inadequate charging infrastructure and expensive upfront and insurance costs.

In the buildings sector, the ‘clean heat market mechanism’ is designed to shift investment from gas boilers to heat pumps, supported by heat pump subsidies. However, this effort is undermined by government levies.

In the late stage of a transition, a deeper restructuring of markets is often needed to make best use of the new technologies. For example, in the UK expensive gas sets the electricity price 98 per cent of the time, despite generating only 40 per cent of the power.

The authors argue that policy action to support the transition would bolster the UK economy, making the UK a more attractive market for global investment.

As a net importer of fossil fuels, the UK stands to benefit significantly while also boosting energy independence and security, which is itself of great value in the current geopolitical environment. “A fast transition to clean technologies could result in an estimated $12 trillion in savings globally by 2050.”

What is USSIM doing to respond

At USS, the reallocation of capital has already begun. In collaboration with the University of Exeter, USSIM has also pioneered a new approach to understand the risks and opportunities from the energy transition through scenario analysis.

This has involved modelling the macroeconomic and financial markets implications of different scenarios, in which alternative trajectories of the low carbon transition interact with pathways of global economic growth and recession.

USSIM uses this analysis to inform its strategic asset allocation, aiming for a resilient portfolio that is sufficiently robust to the various alternative future scenarios for the macroeconomic and investment landscape.

“We seek to assess our portfolio’s flexibility to handle boom-and-bust cycles, withstand market shocks, and seize opportunities as they arise.”

As set-out in USS’s latest Task Force on Climate-related Financial Disclosures (TCFD) report, the investor has examined sector level patterns in outcomes across the various scenarios, and plans to use these to help to inform sector and possibly even company-level investment decisions.

Stranded assets

The macroeconomic effects of the transition are likely to vary substantially across countries.

Dynamic modelling of the global economy suggests that countries that are currently net importers of fossil fuels (including the UK) are best placed to gain in productivity, growth, and economy-wide employment. Those countries that are major exporters of fossil fuels are at greatest risk of negative effects of the transition. These risks are largely outside their control, depending not on national policy, but on changes in global demand for fossil fuels.

But the report also calls for better understanding of energy transition risks and opportunities driving into  the macroeconomy; the sectors in which the transition to clean energy is taking place; and the assets or companies in which investments are held.

A recent analysis by Transition Risk Exeter in partnership with the UK Sustainable Investment and Finance Association (UKSIF) found that even with only policies that have already been announced being implemented and with governments’ existing emissions targets being met, over $2 trillion of oil and gas asset value could be lost as investor expectations are realigned with the reality of lower profits between now and 2040.

The UK is disproportionately exposed due to UK-based companies’ investments in overseas oil and gas assets.

The falling cost of renewable energy

Meanwhile the costs of the core technologies of the energy transition are falling rapidly. The cost of solar photovoltaics (PV), wind turbines and lithium-ion batteries fell by 78 per cent, 59 per cent and 82 per cent between 2013 and 2023, respectively.

These falls continue long-term trends: the cost of solar PV has fallen by a factor of ten thousand in the past 60 years. As clean technology costs fall, demand for them increases; investment follows demand and drives innovation; and costs fall further; thus creating a reinforcing feedback. The implication for investors is clear: assessment of risks and opportunities of the energy transition must be built on an expectation of non-linear change, and an understanding of its drivers.

Engagement pays

USSIM also engages with the companies in which it invests.

This stewardship-based approach to responsible investment is a complement, not an alternative, to integrating rigorous climate and transition risk assessments into investment decisions.

“We aim to help companies identify the right steps to take at each stage of the transition in their sector,” states the report.

USSIM also uses insights gained from the companies in which it invests to inform policy advocacy and how it collaborates with other investors .

“Strong government policy is essential to make faster progress towards a clean energy economy. The best available economic evidence points to a large net saving from this transition globally, as well as further gains being available from innovations in clean technology. We urge the government to double-down on its commitment, and act in all sectors to accelerate the growth of the zero-emission economy,” it concludes.

Returns from one allocation have outshone all others at the $230 billion Teacher Retirement System of Texas over the last year. TRS’s tiny $403 million allocation to gold sits in a commodities sleeve which posted a one-year return of 59.8 per cent, trouncing the Goldman Sachs Commodities benchmark which returned 10.1 per cent.

“One word there: gold,” said Jase Auby, at TRS for 16 years and chief investment officer since 2019, speaking during the pension fund’s December investment committee meeting that celebrated stellar one-year returns across the board with 10 of TRS’s 14 asset categories returning above 10 per cent.

The gold allocation – which was doubled this year – comprises a special gold fund launched back in 2009 to provide a strategy independent of commodities. The fund is invested in gold and silver (via ETFs) and precious metals equities where TRS owns core large cap quality stocks like Agnico Eagle Gold and Wheaton Precious Metals, but also promising exploration and early development stocks.

This year other investors have also tapped into the benefits of an asset that sees its value rise in a world worried by inflation, geopolitical instability and government debt levels, as well as de-dollarisation.

For example, Australia’s A$223 billion ($143.2 billion) Future Fund added exposure to gold. European pension funds, particularly Swiss institutional investors, are long-time gold investors like Migros-Pensionskasse (MPK) the CHF29.4 billion ($31 billion) pension fund for Switzerland’s largest retailer, Migros.

Strong returns across the board

TRS posted a one-year return of 10.7 per cent which equates to a 150 basis point excess return above the benchmark. The fund’s three-year return came in at 11.5 per cent with 190 basis points of excess return. The best three-year return in TRS’  history, it resulted in an additional $66 billion coming into the trust, $55 billion from the market and $11 billion from alpha.

TRS’s highest one-year performers included non-US developed market equities (22.3 per cent) which outperformed US equities for the first time since the GFC. Absolute return also did well, returning 18.2 per cent. Real estate and government bonds were poor performers, and US treasuries have not only dragged on the portfolio but also increased risk because they haven’t provided the diversification they were meant to.

Borrowing from the future

The majority of the outperformance came from security selection: although asset allocation is the primary driver of returns, security selection adds additional value. Still, strong returns in recent years indicate lower returns in the future, and trustees were reminded that the returns should be viewed through a rear-view mirror.

“Sometimes it feels like we are borrowing from the future,” said Mika Malone, managing principal and Meketa Investment Group, presenting to TRS with managing principal Colin Bebee.

Moreover, even though TRS’s one-year returns from private equity still hit double figures (10 per cent) the portfolio’s underperformance relative to public equity will prompt analysis going forward. TRS has a 12 per cent long-term target to private equity that is currently overweight at around 15 per cent.

Risk Parity in action

The board also had an update on the $11.3 billion allocation to risk parity, recently pared back to 5 per cent from 8 per cent of the portfolio. Two-thirds of the diversified, liquid portfolio designed to function well in any market environment due to the balance between different asset classes is managed internally.

Although long-term returns have been up and down, recently it has done well with a positive one-year (10 per cent) and three-year (13 per cent) return.

Auby explained that the allocation is particularly useful in times of need. For example, the TRS team leaned into the allocation for liquidity during the pandemic. It is also the biggest holder of commodities in the trust.

“Risk parity is an alternative way to allocate assets,” he said, explaining that most pension funds allocate in a traditional way without leverage, in equity-heavy strategies that are “tried and true.” But by allocating a small amount to risk parity TRS is able to keep the door open to the strategy, and track its performance against the rest of the portfolio.

In contrast some pension funds like Denmark’s ATP use a risk parity strategy across their entire portfolio.

This is the third part in a series of six columns from WTW’s Thinking Ahead Institute exploring a new risk management framework for investment professionals, or what it calls ‘risk 2.0’. See other parts of the series here. 

In this piece we explore the spectrum of “world views” that could be embedded in an investor’s risk mindset and the associated risk practice that would be consistent with each of them, with the aim of identifying where the “jump” from risk 1.0 to risk 2.0 occurs.

Asset returns are random (risk 1.0)

The simplest worldview that is of some practical use would be that the returns on all asset classes are a random walk (ie independent through time) and drawn from normal or lognormal distributions that are correlated with each other in a given time period.

This formulation is aligned with the mindset of Markowitz (1952) from which risk practices including mean-variance optimisation and Capital Asset Pricing Model emerged.

Asset returns are negatively skewed and “fat-tailed” (risk 1.1)

Most undergraduate finance courses teach that asset returns are typically negatively skewed and “fat-tailed”. This means:

  • adverse outcomes are more extreme than positive outcomes; and
  • extreme market movements are more likely than is predicted by a normal distribution.

[click to enlarge]
There are a number of potential explanations for this outcome including:

  • negative skew is a natural feature of certain asset classes (eg corporate bonds, insurance-linked securities) and trading strategies (eg carry strategies, short volatility)
  • market responses to bad news (fear) tend to be more significant than to positive news, ie “the market goes up by the escalator but down by the elevator shaft”.

The corresponding risk practice could include:

  • adopting non-normal (but still smooth/continuous) distributions to represent asset return outcomes to better reflect likely downside risk outcomes (eg CVaR)
  • greater focus on risks that actually matter (ie mission impairment) and less focus on short-term volatility
  • incorporating higher moments into optimisation processes, eg defining a utility function that factors skew and kurtosis into portfolio evaluation.

Economies and markets exhibit different regimes (risk 1.x?)

A further evolution of the risk mindset would be to recognise that economies and asset markets move through regimes which have materially different risk and return implications. This could, for example, be expressed via a “good” environment (high return, low volatility, diversification works) and a “bad” environment (negative return, high volatility, diversification fails).

Additional enhancements to risk practice that would be consistent with this include:

  • allowing for characteristics of asset returns to be time-varying rather than stationary
  • allowing for economies and markets to “switch” between two or more regimes with pre-determined probabilities
  • creating dependencies between asset classes that reflect real-world economic relationships in these regimes (eg property returns should reflect changes in bond yields as the latter are an input to valuation processes)
  • assuming asset returns are autocorrelated/mean reverting (vs assuming independence through time).

Beyond modelling aspects, other areas of risk practice that have evolved over time include:

  • development of forward-looking scenarios to define regimes and stress test portfolios
  • use of risk factors or return drivers to understand portfolio diversity and likely robustness to different economic regimes
  • use of multiple lenses/dashboards and qualitative considerations to inform investment decisions with less reliance on quantitative optimisation.

Regime changes triggered by the financial system (risk 1.9x/risk 2.0?)

What has been described up to this point represents best-in-class current risk practice which embeds an important underlying assumption – that “shocks” to economies and markets are exogenous (externally driven). However, as was observed in the Global Financial Crisis, shocks causing system-wide effects can originate from within the financial system (ie shocks can be endogenous as well as exogenous).

A first important step towards a risk 2.0 mindset is therefore to recognise that regime changes can be triggered by the financial system itself due to the behaviour of agents within the system. In addition, these regime changes are usually “accumulating in the background”. This adds a belief that economies and markets are complex adaptive systems, which should lead to more significant changes in risk practice than described previously. In particular:

  • switching probabilities are partially uncertain at the outset and respond to the prevailing regime
  • more sophisticated representations of interconnectedness within the financial system than correlation matrices
  • incorporation of path dependency – if regime changes are accumulating in the background this means that Markovian models that only “look at” the current state of the system are insufficient
  • widening the distribution of 10/20 year outcomes beyond conventional models that assume risk on an annualised basis reduces with the square root of time.

The financial system is part of a broader System (risk 2.0)

An important limitation of the risk mindset described above is the focus on the financial system in isolation. In reality, the financial system is a part of the broader (capital-S) System which has “nested” boundaries around society, the human environment and then the planet itself. Importantly, actions of agents in the financial system can impact the broader System (eg climate change, inequality) which in turn can have impacts on the financial system (this is commonly referred to as “double materiality”).

A second related evolution is incorporating “tipping points” which once crossed are very difficult, or impossible, to reverse, ie these can result in permanent transitions of economies, society and environment. Crossing tipping points can trigger systemic risks which result in permanent impairment or stranding of certain sectors of the economy. This is very different to a large fall in markets due to (for example) an economic shock, as these losses are permanent and not subsequently made up.

This suggests that further significant shifts in risk practice are required including:

  • greater use of qualitative risk measures as there is a natural limit to the usefulness of quantitative models in the measurement and management of systemic risks which are highly non-linear and largely irreducible.
  • the use of multi-modal or discontinuous distributions, as the outputs from different systemic risk scenarios are likely to be very differentiated in terms of economic, social and environmental (and therefore financial asset return) outcomes.
  • incorporation of “one way” transitions and absorbing states into risk models to represent tipping points can cause mission impairment – this increases the importance of thinking about risk in time series rather than cross-section due to the “irreversibility of time”.
  • shifting focus from portfolio-level risk management to system-level risk mitigation, as it is highly unlikely that:
    • the impact of systemic risk on portfolios can be reduced through asset allocation as systemic risks are pervasive; and/or
    • that a portfolio can be constructed that is robust to a range of systemic risk scenarios as systemic risks are generally highly non-linear
  • development of dashboards to monitor the accumulation of systemic risks to allow strategic adaptation of the portfolio as the probability of different scenarios and crossing of tipping points changes over time.

The table below summarises the journey from risk 1.0 to risk 2.0 in terms of changes in world view and the resulting investment toolkit. We conclude that the shift from risk 1.0 (or risk 1.x) to risk 2.0 is both transformational (rather than incremental) and can only be partially achieved by the use of quantitative models.

Jeff Chee is global head of portfolio strategy at WTW.

This article was published in partnership with Blue Owl Capital.

This article was published in partnership with Blue Owl Capital.

Asset owners are crying out for bespoke solutions to address their unique and evolving needs, yet many private market managers continue to squeeze them into generic closed-ended funds. Such structures are outdated and face extinction, according to James Clarke, global head of institutional capital at Blue Owl Capital.

When it comes to raising money, private market managers have had it relatively easy.

The culmination of multiple factors, including heightened economic and geopolitical uncertainty, rising inflation, shrinking public market opportunities, innovation in technology, and an under-allocation to private assets, have resulted in a fantastic decade for private market managers.

The global private market investment sector has surged to over US$24.4 trillion from around US$9.7 trillion in assets under management in 2012, according to EY Global, as asset owners have bolstered their allocations to private equity, private credit, and infrastructure in an effort to generate alpha and build more diversified, resilient portfolios.

And there’s more investment to come.

A recent survey of leading global limited partners (LPs) conducted by consultant McKinsey found that investors plan to allocate more capital to private markets in the near term.

However, the dynamics are changing, and managers need to wake up to the bespoke needs of their clients.

Fundraising across all private asset classes has become more challenging, with investors demanding greater value, flexibility and stronger alignment of interests.

At the same time, private market managers are grappling with fresh headwinds including competitive pressures, narrowing exit options, and heightened regulatory scrutiny.

McKinsey’s 2025 Global Private Markets Report described dealmaking conditions in more recent times as “tepid” and “likely to remain uneven”, as managers adapt to an industry in “transition.”

“Fundraisers are looking beyond closed-ended channels to raise capital in new vehicles, such as evergreen funds,” the report stated, adding that investors are moving away from passive allocations and seeking to invest directly or co-invest in assets alongside GPs, and actively engage companies.

This transition was inevitable.

Traditional closed-ended structures, which pool and lock money up for a fund’s lifecycle, are not optimal for many institutional investors, particularly large allocators.

Illiquidity aside, there’s little-to-no ability for investors to influence underlying investment and management decisions.

Additionally, there are question marks over whether client service is meeting the mark. And the level of service in general needs to improve, in my opinion.

Take it or leave it

Closed-ended funds are still the dominant vehicle for accessing private markets, but their generic, one-size-fits-all nature is hardly befitting of some of the world’s largest asset allocators.

Globally, institutional investors, including pension funds, sovereign wealth funds and endowments, manage an estimated US$58.5 trillion, according to the Thinking Ahead Institute’s Global Pension Assets Study. They are all different and unique, reflecting their membership, and they deserve to be treated that way.

Conversations with a Californian defined benefit fund will differ wildly to a UK defined contribution fund, highlighting the irrelevance of a single, one-dimensional solution for both.

Customisation should be table stakes, as it is with most other goods and services, from cars to legal advice and I would argue, institutional public market investments.

Private market managers have historically been largely immune. Ironically, it is their success and the growth of private market assets over the past decade that is driving change and progress.

Active listening and active management

Private market managers need to actively listen and respond to client demands for bespoke solutions that meet their specific circumstances, requirements and objectives.

They need to lift service standards significantly and innovate to reflect the fees that they earn, and the trusted, respected relationship that asset owners expect from their service providers.

If they don’t act swiftly, the trend suggests that more institutional investors will bring private assets inhouse.

Asset owners themselves are growing and maturing. They are reshaping their teams, expanding their investment capabilities, and expecting more from their partners.

Private market managers also need to evolve to better serve and cater to the needs of their clients. They can’t rely on traditional fund structures, given their limitations, or a drop in and out service mentality. Instead, they should build bespoke solutions that offer more control, flexibility, and optionality – approaching every client engagement as a true partnership.

The Principles for Responsible Investment (PRI) will reduce signatories’ responsibilities in their annual mandatory reporting, as the UN-backed body looks to stay relevant amid a surge of new responsible investment codes and standards.

The reporting framework will be slashed to consist of just 40 questions, down from the current 240 and will come into force next year. 

Outgoing PRI chief executive David Atkin says the change recognises that investors bear too much administrative burden around ESG disclosures but promises that the simplified assessment will be just as rigorous. 

“The overhead [in our reporting] was disproportionate to the value of the effort,” he tells Top1000funds.com in an interview before he officially stepped down on December 1. Atkin will remain at the PRI as an advisor until April 2026. 

“The reporting system has been very important, and it’s been such a critical element of the growth of responsible investment around the world, but at a time when there are now so many other mandatory requirements and voluntary codes, our signatories were drowning under the amount of work they had to do.” 

Atkin said the new assessment will remove more “granular” questions such as those on the asset class and strategy levels, and will instead focus on organisational level commitments such as how ESG is incorporated into governance and investment analysis.  

A new concept that was introduced into the new reporting framework is the so-called three-pronged “PRI pathways”, which essentially allow signatories to choose an ESG approach to align with. They can choose to incorporate ESG factors in their investment approach, address sustainability-related financial risks, or pursue positive impacts. 

Atkin does not see this approach as putting the reporting system at risk of being gamed. Instead, it could offer better insights for asset owners who may want to see if a manager has an aligned responsible investment approach.  

“I think that’s much more useful information than trying to get all of that through the [old] assessment, which is one size fits all and just frustrates everybody,” he says.  

There have been some volatile sentiments around responsible investments, particularly in the US due to the Trump administration’s hostile stance against ESG principles.  

This September, the US Employee Benefits Security Administration, which oversees $14 trillion of the nation’s private retirement assets, labelled the OECD’s responsible investment principles for pension funds “nothing but a Marxist march through corporate culture” and said it will no longer support such policies. [See US Department of Labor slams OECD on ‘Marxist’ ESG policies]. 

Asset managers which were public supporters of responsible investment also had to work hard to win back or retain mandates from US public funds, such as the $11.5 trillion BlackRock which was removed from Texas politicians’ blacklist only after it dropped out of Climate Action 100+ and the Net Zero Asset Managers alliances. [See Texas politicians reinstate BlackRock as manager’s ties to the state grow]. 

The role of asset owners 

Atkin says asset owners can play a bigger role in stabilising the discussion around responsible investments.  

“If asset owners are consistent in signalling to the marketplace that responsible investment remains relevant and that they will reward those managers who are aligned with mandates and incentivised around working on those [responsible investment] areas, the political stuff will just take care of itself,” he says.  

Atkin has seen discussions around ESG flip during his time at the PRI. When he joined PRI in 2021, investors were living through peak “ESG”. Stronger recognition around climate change and social unity, alongside a positive geopolitical environment, contributed to the tailwinds around responsible investment post-COVID.  

But soon after, the Russian invasion of Ukraine and the inflation-fuelled cost of living crisis have given a voice to populist politicians, which included climate denialists.  

Despite the pushbacks, Atkin says the green energy transition will not change direction as its logics are rooted in economics, not politics. 

“It is unstoppable,” he says. “In a world where we now need to create more energy capacity to deal with AI and data centres… when you look at the comparison between the cost of building renewables compared to fossil fuels, it’s very clear that renewables are the more economical solution. That’s got nothing to do with politics.” 

“If you believe the science, and you are suddenly stopping work [on responsible investment] because the politics have got difficult for you, then you are not performing your fiduciary responsibility. 

“In fact, I think you’re exposing yourself to litigation risk.” 

In December, Atkin returned to his home country of Australia and will support interim chief executive Cambria Allen Ratzlaff in an advisory capacity until April 2026. PRI lifted the number of signatories from 3,000 to more than 5,000 during his time as the chief executive.

Before that, Atkin spent 15 years on PRI’s board between 2009 and 2015, which is why he anticipates ongoing contributions from Asia Pacific to the organisation even though he has left the executive post.  

“As an industry, if you’d said five years ago that we would have more than 50 per cent of the world GDP covered by sustainability standards, I would have said you were dreaming,” he says. 

“But that’s where we are right now, 60 per cent of the world are in the process of adopting ISSB standards.” 

Most importantly, emerging markets are upping their game in creating sustainable investment opportunities with “pragmatic” policymaking and “institution-oriented” governments, which is crucial as they account for a significant portion of the global population.  

“You could say one sign of success is that we’re not needed. But I think there’s going to be an ongoing need for an organisation like the PRI because you’ve got people continuing to go on their learning,” Atkin says.  

“I’m really proud of the fact that we’ve been able to navigate this complex environment, introduce new and better value to our signatories, and reinvigorate our relationship with our asset owner community. 

“There has been a lot of time invested, but I’m really excited about the future.”