Beyond the Ballot

In its 2025 paper, The Policy Challenges of the Energy Transition, USS Investment Management argues that climate change and a disorderly energy transition pose systemic risks that pension funds cannot avoid through diversification. Rather than relying on portfolio decarbonization or selling high-emitting assets, which merely transfers ownership without reducing real-world emissions, USSIM calls on asset owners to collaborate and engage with policymakers and regulators. It also uses climate-transition scenario analysis to inform strategic asset allocation, company engagement, investor collaboration, and policy advocacy.

USSIM’s approach reflects the particular interests of diversified investors, whose returns depend heavily on the stability and performance of the wider economy. Climate tipping points, stranded fossil-fuel assets, market shocks, and uneven transition effects can spread across companies, sectors, and countries, while a faster transition could reduce global energy costs and support economic growth. The report therefore urges governments to adopt policies tailored to each stage of the transition, including public procurement, zero-emission vehicle mandates, energy-levy reform, grid investment, and electricity-market reform. For USSIM, policy engagement is a form of systemic risk management: government action can help protect the economic conditions on which long-term portfolio returns depend.

Indonesian forests are among the most biodiverse in the world, home to 10-15% of the world’s known plants and animals. While the country has massively reduced deforestation since 2016, a new government program, the Food and Energy Estates, threatens to undermine and reverse that progress. Cited as the largest deforestation project in the world, it could more than double Indonesia’s climate emissions, exacerbating financial and systemic risks.

The risks of biodiversity loss are particularly pertinent for long-term diversified investors, for whom overall performance of the market is responsible for the majority of returns. Over half of the world’s GDP is estimated to be moderately or highly dependent on nature and its services. This dependence coupled with rising deforestation and biodiversity loss risk an annual global GDP decline of $2.7 trillion in the near term if ecological tipping points are reached, threatening the ability of investors to meet their long-term financial commitments.

Green Century Capital Management and former US Ambassador to Indonesia Robert Blake led investor trips to Jakarta to meet with relevant government officials and companies on nature and climate-related risks and opportunities in Indonesia.

The Global Investor Commission on Mining 2030 is an investor-led initiative involving more than 120 financial institutions representing approximately $18 trillion in assets. The Commission examines how capital markets engage with the mining sector, recognizing mining’s importance to the energy transition, infrastructure, and industrial supply chains, as well as its broader influence on portfolio performance.

Mining 2030 promotes a system-level approach to investor stewardship through coordinated engagement, shared standards, improved sustainability frameworks, and collaboration with financial institutions and policymakers. The initiative reflects a broader shift in investor practice beyond company-specific engagement toward efforts to shape the market structures and policy environments that influence long-term economic and portfolio outcomes.

After workers at JBS’s Greeley facility launched a strike over unsafe working conditions, unfair labor practices, and stalled contract negotiations, in March 2026 the AJL Foundation—an investor in the company—took the unusual step of joining workers on the picket line. Rather than treating the situation as a peripheral labor dispute, AJL framed it as a material financial and operational risk, linking worker treatment to productivity, turnover, legal exposure, and long-term company performance.

AJL explains this action through a broader, system-level view of fiduciary duty. It argues that poor labor practices don’t simply affect one company—they “shift costs from corporate balance sheets onto communities, governments, and mission-driven institutions,” creating wider economic strain. In this case, the risks extend beyond the firm: JBS is a major regional employer, and disruptions in labor relations can ripple through local economic stability and supply chains. These impacts, in turn, can “depress economic growth in ways that jeopardize the long-term stability of diversified investor portfolios.” According to AJL, standing with workers is not symbolic activism but prudent risk management in an interconnected economy, where protecting long-term value requires addressing how corporate practices affect workers, communities, and the broader system.

Large pension funds and asset managers are beginning to incorporate AI oversight directly into stewardship and governance practices designed to protect long-term economic stability and diversified portfolio value.

As noted in a recent report by Majority Action, AI Stewardship in Motion, ​​UK asset owner, Railpen, has adopted an AI stewardship framework that stands out because it explicitly treats artificial intelligence as a portfolio-level and system-level risk rather than simply a company-specific governance issue. Its proxy voting guidelines identify AI-related harms — including misinformation, discrimination, privacy violations, rising emissions from energy-intensive computing, and workforce disruption — as threats that can undermine the broader social, economic, and environmental systems on which long-term diversified investors depend. Rather than limiting oversight to operational resilience or reputational exposure at individual firms, Railpen expects companies to account for “social and environmental impacts across the AI value chain,” align with evolving best practices, and establish robust governance, transparency, and board accountability structures proportionate to their risk exposure. Where companies fail to manage these risks adequately, Railpen has indicated it may vote against directors responsible for oversight.

This approach parallels Railpen’s stewardship on antimicrobial resistance (AMR), where the fund has likewise framed the issue as a systemic threat to long-term portfolio value and economic stability. In both cases, Railpen recognizes that diversified investors are exposed not only to risks at individual portfolio companies, but also to broader breakdowns in the public systems that underpin market returns — including healthcare systems, labor productivity, democratic institutions, energy infrastructure, and social trust. AI-related misinformation, labor displacement, or unchecked emissions can create economy-wide instability in much the same way that widespread antimicrobial resistance threatens global health systems, workforce participation, supply chains, and long-term economic output. Railpen’s stewardship model therefore reflects a growing arena of investor responsibility in which governance expectations, proxy voting, and company engagement are used not merely to protect isolated holdings, but to preserve the resilience of the overall economic and social systems necessary for long-duration portfolio performance.

Universal Ownership – a guide for charity and university asset owners comes two from two UK-based networks—Responsible Investment Network – Universities (RINU) and Charities Responsible Investment Network (CRIN)—organized by ShareAction. It shows how investors can protect portfolio returns by guarding the systems upon which we all rely.

The report applies to “universal owners” (long-term investors, or those who are sufficiently diversified that they own a significant share of the market for whom it is likely that their overall returns will be influenced more by the success of the overall market than by the value of individual stocks) and addresses tools such as sector-wide guardrails, denying primary financing to harmful activities, and using stewardship, policy advocacy, and manager mandates to curb negative externalities.

The guide is practical: it outlines capital-allocation levers, evaluation metrics tied to real-world outcomes, and case studies (e.g., climate, antimicrobial resistance, wages) that show how mission-driven investors can align investment influence with the health of people, planet, and the economy.

In a persuasive summary of the investment benefit of thinking holistically, the report explains:

For universal owners, therefore, risk is not just considered at an asset level, but also in terms of the risks to wider financial and economic stability. While Modern Portfolio Theory always assumes a risk-free investment opportunity is available, universal owners recognise that investors are unlikely to be able to ‘stock pick’ their way out of large-scale economic turbulence – and the emphasis should therefore be on reducing these wider economic risks. Investors should be ‘fighting climate change not just managing climate risk.’

In practice, this may mean acting to reduce the negative externalities generated by portfolio companies which contribute to systemic risk, even if this would reduce the value of the company – as doing so would protect the value of the portfolio at large over the longer term.

Australia has one of the highest rates of deforestation among developed countries, placing significant pressure on ecosystems that underpin long-term economic stability. Forest loss threatens biodiversity, carbon sequestration, water systems, and agricultural productivity—all of which are critical inputs to economic activity and financial performance. Continued deforestation increases systemic risk by eroding the natural capital on which diversified portfolios ultimately depend.

Recognizing these risks, Australian Conservation Foundation (ACF), alongside Sustainable Investments Exchange (SIX) and other investors, co-filed shareholder proposals at ANZ Group Holdings and NAB Group calling on the banks to strengthen their deforestation policies and commit to ceasing finance for customers engaged in deforestation. To further articulate the financial implications of deforestation, ACF produced a video featuring leaders in responsible investment, ecology, and economics examining why halting and reversing deforestation is essential for long-term prosperity. The discussion highlights how ecosystem services—such as clean water, pollination, climate regulation, and resilience to extreme weather—are foundational to economic activity, and how their degradation threatens the profitability of the greater economy.

By framing biodiversity loss in terms of long-term financial returns, ACF’s work illustrates how failures to account for environmental externalities amplify systemic risk. Projects like this help bridge environmental advocacy and capital markets, strengthening the case for system stewardship and reinforcing the relevance of nature-related risks to diversified investors’ long-term obligations.

In 2024, Universities Superannuation Scheme (USS)—the largest private pension scheme in the country in terms of assets under management, and the principal pension scheme for universities and Higher Education institutions in the UK—published a website post explaining “universal ownership” and why USS believes that economy-wide risks require attention.

In the post, “USS is a Universal Owner — but what does that mean?” USS characterizes itself as a Universal Owner because its highly diversified, long-term portfolio reflects a broad cross-section of global capital markets. In that context, it acknowledges that systemic, economy-wide risks—such as climate change and biodiversity loss—are financially material to overall portfolio performance and cannot be mitigated simply through divestment or stock selection. USS frames these risks as inherent to its investment model and emphasizes that the long-term health of the global economy is closely tied to its ability to deliver sustainable returns for members.

Given that framing, USS positions universal ownership as a rationale for active stewardship and collaboration with other large investors. Rather than narrowing its investable universe, it highlights engagement, responsible investment integration, and collective action as the appropriate tools for managing systemic risk. 

In late 2025, Australia-based IGCC published its Systems Stewardship: Managing Interconnected Climate Risks for Lasting Value report, commissioned by the Investor Group on Climate Change and authored by the Institute for Sustainable Futures at UTS, that positions systems stewardship as a necessary evolution of traditional investor stewardship practice. It defines systems stewardship as applying systems thinking to understand and address interconnected, economy-wide risks—such as climate change, biodiversity loss, human rights and resource constraints—that cannot be mitigated through company-level actions alone. The report finds that a majority of surveyed Australian institutional investors recognize system-level risks as material and are incorporating systems thinking into their stewardship, with collaboration, policy advocacy and sector/value chain engagement emerging as key practice areas. However, challenges including resource limits, regulatory uncertainty, short-term performance pressures and a lack of shared metrics constrain deeper implementation.

To scale impact, the report outlines practical recommendations for investors to integrate systems stewardship more deeply into governance and investment practice. These include strengthening collaborative engagement, aligning incentives and metrics with long-term system outcomes, clarifying regulatory guidance, building organisational and sector capacity, and embedding systems stewardship expectations into mandates and accountability frameworks. By grounding these activities in fiduciary duty and focusing on systemic leverage points, the report explains that investors can better safeguard long-term financial returns while influencing the structural conditions that shape real-world transitions and systemic resilience.

Australian ethical share trading platform SIX’s 2026 report, Unpacking Plastic Risk on the ASX, examines plastic packaging practices across 22 ASX-listed companies and argues that plastic pollution creates risks extending beyond individual companies to the broader economy and diversified portfolios. The report explains that health and ecological costs from plastic pollution can undermine productivity and economic growth across sectors, meaning highly diversified investors may bear costs even when individual portfolio companies profit from plastic production or use.

SIX calls on investors to press companies to disclose and reduce their total plastic packaging use, eliminate hazardous chemicals, and publicly support stronger packaging policy. It also identifies escalation options—including publicly stating expectations, voting against directors, and supporting shareholder resolutions when companies fail to meet them. The report points to existing investor action, including a statement backed by 185 institutional investors representing more than $10 trillion in assets calling for major users of plastic packaging to reduce their dependence on single-use packaging and support effective government policy.

This approach frames plastic pollution as more than a company-specific ESG risk: for diversified investors whose returns depend on the performance of the broader economy, reducing plastic-related externalities may help protect the economic and environmental systems on which long-term portfolio value depends.