The £25 Billion Threshold: Why Scale Now Shapes the Future of Stewardship

For the world’s most influential asset owners and long-horizon capital managers, scale is no longer a secondary consideration; it is a structural requirement. Across the UK, Europe, North America and Australia, policymakers and institutional investors are converging on the same conclusion: only the best-governed, best-capitalised funds can deliver the combination of market resilience, real-economy impact, and fiduciary stewardship that the current era demands.

At Sustainable Investor, our editorial lens is focused on that cohort: institutions with £25 billion+ in AUM, because they possess the investment flexibility, governance sophistication, and policy influence to drive capital market change, not simply respond to it.

UK: Legislating Scale for Impact

In the UK, the government’s proposed legislation to enforce a £25 billion AUM threshold for multi-employer DC schemes by 2030 signals a profound shift in pensions policy. Default arrangements below this threshold will be required to either consolidate, demonstrate a plan to reach scale by 2035, or exit the market.

This initiative is more than regulatory housekeeping, it is a clear effort to catalyse institutional-scale capital formation for long-term UK growth, particularly in private markets and energy transition infrastructure. It complements the Mansion House Compact and is a direct response to the fragmented, cost-driven pension landscape that has struggled to allocate meaningfully into productive assets.

“The UK DC market is largely de-risked and low governance. To allocate effectively into real assets, scale and governance professionalism are essential,” noted a senior DWP advisor involved in the drafting of the policy.

LGPS: Consolidation in Motion

While the focus on DC reform has made headlines, Local Government Pension Schemes (LGPS) are undergoing a significant consolidation of their own. Since the launch of LGPS pooling in 2015, eight asset pools now oversee over £350 billion in assets collectively.

Entities like Border to Coast, Brunel Pension Partnership, and London CIV are now not just aggregators of capital, but increasingly active players in direct investment, stewardship leadership, and climate transition strategy. The most effective pools are developing internal capabilities across private markets, real estate, and infrastructure—mirroring the governance and operating models of Canadian and Australian public funds.

The LGPS journey illustrates that consolidation is not purely a scale play, it is a governance transformation, equipping funds to take greater ownership of ESG integration, risk oversight, and long-term economic alignment.

Global Signals: When Scale Becomes Stewardship

The UK is not alone. Around the world, institutional funds are recognising that scale is the enabling condition for stewardship that moves beyond proxy voting and into capital reallocation.

In Australia, APRA’s performance and outcomes tests have driven voluntary mergers across superannuation, producing a concentrated market of 15+ “megafunds” with deep in-house capabilities.
In Canada, public sector giants like CPPIB and BCI operate multi-asset strategies with internal teams rivaling those of global asset managers.
In the Netherlands, industry-wide schemes have long benefited from pooled governance and centralised stewardship, with transition planning embedded in their investment models.
In the U.S., while fragmentation persists, state plans and pooled employer arrangements are gaining traction, albeit without a centralised policy driver.

What the £25bn Threshold Really Represents

Our focus on the £25 billion mark is not just about scale for its own sake—it is shorthand for institutional readiness. The funds we follow and write for are:

Allocating to illiquid at scale, without excessive fee drag or governance strain.
Developing and enforcing ESG frameworks internally—not outsourcing judgement.
Active participants in policy, disclosure, and systemic risk dialogues, from TNFD to ISSB to Net Zero initiatives.
Engaging with markets directly, through real assets, thematic debt, and transition capital.
Building sustainability into their operating DNA embedding climate transition, adaptation, and long-term risk analysis into strategic asset allocation, portfolio construction, and engagement protocols.

“At this level, stewardship is a function of organisational architecture,” says the CIO of a £40bn UK pension pool. “You need investment governance, not just a policy paper.”

These funds are equipped not only to evaluate long-term systemic risks like climate, biodiversity loss, and supply chain fragility—but to actively manage and mitigate them. Their ability to integrate sustainability into investment decision-making is directly linked to the internal resources and scale they command.

Consolidation as Market Infrastructure

From the LGPS pools in the UK to the super funds in Australia and the pension giants of Ontario, consolidation is creating the market infrastructure for long-term capital deployment. This is no longer a theoretical debate about fund economics, it is a live reordering of the global pensions architecture.

For consultants and asset managers, this changes the commercial landscape: fewer clients, more sophisticated buyers, and higher expectations around transparency, customisation, and long-term alignment. For asset owners, it opens access to deal flow, policy influence, and portfolio agility that sub-scale entities struggle to match.

The Strategic Imperative

The institutions above the £25bn threshold are not just large, they are systemically relevant. They have the ability, and increasingly the mandate, to embed long-term thinking across asset classes and geographies.

At Sustainable Investor, we are focused on that universe. Because these are the funds shaping tomorrow’s markets, redefining stewardship as an active discipline, and operationalising sustainability beyond compliance.

If you are one of them or advising them, allocating for them, or competing with them, this is your platform.

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