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Universal Ownership: why environmental externalities matter to institutional investors


This study assesses the financial implications of unsustainable natural resource use and pollution by business. Trucost calculated the cost of global environmental damage for seven major environmental impacts. As environmental damage can be quantified in monetary terms it can be integrated into financial analysis.

The UN Principles for Responsible Investment (PRI) and United Nations Environment Programme Finance Initiative (UNEPFI) commissioned Trucost to calculate the cost of global environmental damage and examine why this is important to the economy, capital markets, companies and institutional investors. Large diversified institutional investors such as pension funds, mutual funds and insurance companies are “Universal Owners”.

The holdings of Universal Owners are broadly representative of the structure of capital markets, which in turn represents a slice of the productive capital of the global economy. Universal Owners have a clear financial interest in the enduring health of capital markets and the economy. Universal Owners are the long-term owners of large companies that impose significant environmental costs onto the economy. Companies do not normally pay the full costs of environmental damage caused by their business activities, so these costs are largely ‘external’ to financial accounts. Without adequate information about these ‘externalities’, markets have failed to accurately account for the dependence of businesses on ecosystem services such as a stable climate and access to water.

View the report here: Universal Ownership: why environmental externalities matter to institutional investors.