AllAboutAlpha: ‘technologizing’ institutional investment for ESG

Climate change, rickety public health systems, demographic upheaval, decaying infrastructure, urban migration, wealth inequality, and diminished supplies of critical natural resources are all challenges that will, at least in part, need to draw on the long-term capital and enormous scale of the world’s beneficial institutional investors. Indeed, it will be up to this community of public pension funds, endowments, foundations, family offices, insurance companies, and sovereign funds to deploy the long-term capital needed to tackle these unprecedented threats.

That’s where technology steps in. Researchers Ashby Monk, executive and research director at Global Projects Center, Stanford University, and Dane Rook, research engineer at Global Projects Center, Stanford University, have undertaken a half-decade research program to test whether technology might be able to solve innovation impasse in institutional investing. Their chief finding: embracing advanced technology can empower institutional investors to innovate in ways that let them capitalize on their ability to take a long-horizon view of the world.

So, what exactly does a technologized future look like for institutional investing? The most honest answer is: diverse. Being technologized means using technology to build and extend comparative long-term advantages for the organization; and every institutional investor has its own unique features that will lead to distinct advantages. As such, the tech armament of any two properly technologized investors will differ. Yet two broad categories of technology that we see as being applicable to most technologized investors are alternative data and knowledge management.

Collaborating with other institutional investors on technology is also something that we’ve seen produce inspiring gains for those involved. There’s a huge number of ways in which institutional investors can collaborate on technology, from engaging in joint experiments to sharing case studies, impressions of providers, and best practices.

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