Tackling climate change has become the number one priority for investors. But how is the asset management industry dealing with an issue that is both a threat and an opportunity? Are we ready for the biggest challenge facing humanity?
- 86% see climate change affecting their investment policy
- 81% see renewable energy leading decarbonization drive
- 66% will focus decarbonization on global equities in 1-2 years
To find out, Robeco commissioned a survey that asked probing questions to more than 300 insurance, institutional and wholesale investors accounting for about 20% of global assets. The results have been both encouraging and an indication that much still needs to be done.
Perhaps the biggest message from those surveyed is that half of all assets under management will be committed to net zero in the coming years. Some 86% of investors saw climate change as a significant factor in their investment policy over the next two years, sending a massive message that decarbonization is well under way.
Most believe that renewable energy forms part of the solution: 81% said solar, wind and hydrogen power would lead the way in switching from fossil fuels. And 66% said they would focus portfolio decarbonization efforts on global equities as their preferred asset class for achieving this over the next one to two years.
One of the possible paths to a low-carbon economy is to set net zero carbon emissions targets. While the number of investors that have already set a net zero target is relatively small (17%), it’s on an upward trajectory that is expected to rise to over half of all investors (52%) in the next five years.
Europe and North America lead
The shift will take place mainly in Europe and North America, where more than 60% of investors in both regions expect to adopt a zero carbon target within this time frame. The Asia Pacific region is behind, with only 29% of investors expecting to do the same.
There is an increasing awareness among investors of the need for decarbonization and to support the transition away from a dependence on fossil fuels and towards a low-carbon economy. The survey revealed that divesting from carbon-intensive assets will rise sharply in the next five years.
And yet, over 40% of investors globally have not divested their carbon-intensive assets over the past five years. This is expected to fall to just 19% for institutional and 25% for wholesale investors in the next five years.
Mind the gap
The results also showed there is a substantial knowledge gap when it comes to fully understanding the major issues, and many investors simply don’t know where to start with this, or how to make a difference.
At the same time, there’s a clear demand for more specialized expertise, support and education on climate change, with 44% of respondents globally viewing the lack of data and reporting as the biggest obstacle to implementing decarbonization. That percentage is even higher in Europe (58%). In the Asia Pacific region, the shortage of suitable low-carbon investment strategies is the biggest concern (54%), and North America sees the lack of internal expertise on decarbonization as the biggest challenge (45%).
We need a global effort
“Moving to a low-carbon economy needs a global effort, with governments, regulators, the corporate sector and individuals all playing their part,” says Gilbert Van Hassel, CEO of Robeco.
“This survey shows that the vast majority of investors are committed to tackling climate change, which is a promising sign. Yet it has also revealed a substantial knowledge gap when it comes to fully understanding these major issues, with many investors not knowing where to start or how to make a difference.”
“The time to act really is now. As a global leader in sustainable investing, we see it as our duty to share our passion and expertise with those who have yet to fully embrace it, so that together we can rise to one of the greatest challenges facing humanity: the climate crisis.”
The overall purpose of this survey is to show where we are as an industry and help investors understand the urgency of dealing with this. We hope it presents interesting insights into the current status of climate investing, as well as the challenges and opportunities that climate change presents.
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