Impact Blog
World's equity capital highly concentrated, OECD finds

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      By Calvert Research and Management

      Washington - The world's equity capital is highly concentrated among a handful of shareholders and institutional investors, according to a recent report by the Organization for Economic Cooperation and Development (OECD).1 This can pose risk — as well as opportunity — for investors trying to assess and influence companies' environmental, social and governance (ESG) practices.

      Holdings by institutional investors total 41% of global market capitalization, the OECD found. In addition, in half of the world's listed companies, the three largest shareholders hold more than 50% of the capital. Of course, there are wide geographic variations. By region, the U.S. holds the world's largest share of public equity, at 38%, with Asian markets collectively representing 34%.

      1118OECDChart1

      Echoes Serafeim-Calvert research

      The OECD findings mirror concerns reported by Harvard Business School professor George Serafeim, in collaboration with Calvert, in the 2018 research paper "Investment Stewardship for Positive Societal Impact." That research examined the concentrated ownership position and influence of large investors, proposing they collaborate to act as "stewards of the commons," or common good. As illustrated in the chart below, these key players have a large, collective financial stake — and influence — in industries with critical ESG issues.

      1118SerafeimChart

      Growing momentum to act

      Institutional investors worldwide have been instrumental in promoting Responsible Investing. Signatories to the United Nations' Principles for Responsible Investment (PRI) reached 2,232 in 2018, a 21% increase from the previous year.3 Concerned about issues such as climate change, diversity and income inequality, these investors have committed to incorporating ESG criteria into their investment processes.

      By advocating for collaboration and collective action, investors can provide positive impetus in the many cases where even the best efforts of individual firms are likely to fall short.

      Bottom line: We believe the OECD findings reinforce our assertion that large investors, acting together, are uniquely positioned to advance ESG initiatives across industries and regions. As large bodies of research have shown, ESG issues can be material to companies' financial well-being as well as their reputations.