Asset owners say they expect that the European Union's recently announced "Green Deal" will provide them with a clearer framework to evaluate, measure and participate in sustainable investment opportunities, which are set to increase under the ambitious package.
European institutional investors have been ramping up sustainable development goals-driven investing and reducing their portfolio exposure to companies producing high levels of carbon dioxide emissions since 2015, when the Paris Agreement and its focus on climate change was adopted.
Investors predict that the investment strategy of the EU's Green Deal, which was confirmed by the European Commission on Jan. 14, will make more investment choices available to them across Europe, including, for example, more renewable energy projects, green bonds, social impact investments and new companies facilitating a transition to a green economy.
"The Green Deal will open the world of impact investing to institutional investors," Gregoire Haenni, chief investment officer of the $20 billion Caisse de Pre- voyance de l'Etat de Geneve, Geneva, said in a telephone interview. "It's a game changer."
The EU's investment plan, set to launch in 2021, is aimed at channeling €1 trillion ($1.1 trillion) from public and private investors over a decade into curbing greenhouse gases, supporting industries and protecting workers in the transition toward a carbon-neutral economy by 2050. Under the plan, the commission alongside the European Investment Bank will select and co-invest in projects and companies across Europe. That government backing is expected to boost the risk-return profiles of the projects as well as their viability, all of which should make them appealing to institutional investors.
More than half of the €1 trillion will come from the commission's own budget, while the rest is expected to be contributed by investors.