Methodology

To construct the universe of funds for the 2019 study, researchers utilized updated lists of sovereign wealth funds and government pension funds from the 2017 study, as compiled by the International Forum of Sovereign Wealth Funds, the Organization for Economic Co-operation and Development (OECD), the Pacific Pension & Investment Institute (PPI), Professor Paul Rose at the Ohio State University Moritz College of Law, and the Sovereign Investor Institute’s Sovereign Wealth Center. In addition, two more lists were added for the 2019 study, compiled by Northern Trust, and Willis Tower Watson.¹

This resulted in a comprehensive list of 624 asset allocators (compared to 298 in 2017). The comprehensive list was then cleaned of all duplicates and sub-managed accounts, eliminating 153 funds and resulting in a universe of 471 asset allocators to be analyzed, with total assets under management (AUM) of $30 trillion.

Researchers then went through a series of steps to arrive at the final list of funds to be rated. First, all asset allocators other than SWF and GPF, the focus of the RAAI, were eliminated from the universe (including private and corporate pension funds, endowments, foundations, philanthropic organizations, family offices, insurance firms and asset managers).

Second, to ensure the SWF and GPF were sufficiently large and had adequate data for ratings consideration, researchers eliminated funds with less than $2 billion of AUM, and that could not be evaluated on responsible investing practices because they:

• had highly constrained portfolios (for example, investing only in treasuries);
• were newly established with insufficient data;
• were not yet funded or
• did not have information available in English.

This eliminated 263 funds with AUM of $10 trillion.

Finally, funds were eliminated from ratings coverage if

• AUM had been substantially depleted or removed by stakeholders,
• the fund had been dissolved,
• the fund was embroiled in legal action due to fraud or scandal,
• AUM had been frozen or
• the fund’s mission and/or remit had been substantially changed, leading to reassessment of investing goals and processes.

This last step eliminated 11 funds, leading to the final list of 197 asset allocators that were rated, comprising AUM of $21 trillion. The top 25 scoring asset allocators, with AUM of $5.9 trillion, were selected for “The RAAI Leaders List: The 25 Most Responsible Asset Allocators” in the world.

Each of the 197 asset allocators in the final list were rated across 20 criteria, two for each of the 10 core principles, up from 12 criteria in 2017 (see Principles and Criteria section for more). Reviewers analyzed information from the public domain to rate each fund, including annual reports, company websites, reports, articles, and other publicly available information. Rated funds received either full or zero points for each criteria; no partial points were assigned. Each fund was analyzed by an independent reviewer and then ratings were double-checked by an expert.

Once scores were aggregated, asset allocators were rank ordered and divided into quintiles such that quintile cut-off scores ensured a similar number of asset allocators in each quintile (about 40 asset allocators per quintile in 2019 compared to 25 per quintile in 2017). Quintile 1 comprises the highest-rated asset allocators, while quintile 5 comprises asset allocators that received the lowest ratings.

Only some of the asset allocators in quintile 1 made the Leaders List in 2019 (in 2017, when there were a total of 121 rated asset allocators, all the asset allocators in quintile 1 qualified as Leaders). In 2019, a new Finalists category was created to recognize the next 25 highest ranked funds (i.e. those ranked 26-50).

The RAAI index provides the first comprehensive analysis of the responsible investment practices of the world’s largest SWF and GPF, but there are limitations to this study. The criteria, while expanded and customized for asset allocators, are by no means an exhaustive list of responsible investing characteristics. Some important metrics may be overlooked. Second, only SWF and GPF that disclose information in English are rated. Thus, it is possible that a SWF and GPF with good responsible investing practices but limited English disclosures could be overlooked by this study. In addition, awarding full or zero points for each criteria leaves little scope for nuanced analysis and ratings. Finally, since the index only covers SWF and GPF, there are many worthy asset allocators that are not included in the study.