More asset owners are investing with the climate in mind, except in North America, according to research by Ninety One into investment approaches for the energy transition.
The $155 billion asset manager's annual Planetary Pulse Report looks at various asset owners' investment approaches to the risks and opportunities presented by climate change and the energy transition.
The research conducted by FT Longitude surveyed 300 asset owners and consultants across eight subindustries. Respondents comprised 125 in Denmark, Germany, the Netherlands, Switzerland and the U.K.; 80 in the U.S. and Canada; 60 in Australia, Hong Kong and Singapore; and 35 in Botswana, Namibia and South Africa.
The asset owners were asked about strategies, practices, real-world impacts, targets and frameworks. Approaches ranged from setting targets for entire portfolios to focusing on high emitters to achieve their own net-zero goals.
Some 48% of asset owners surveyed have between one-quarter and half of their assets under management invested in portfolios with climate-related instructions or objectives, up from 40% in 2022.
In North America, commitment to climate-related investment practices went the other way, with climate-related factor integration and positive screening falling to 25% and 45%, respectively, from 52% in 2022. North America-based respondents were the only ones confident that their decarbonization strategies are leading to an actual reduction in emissions, the report said.
Overall, climate-related targets and metrics used by asset owners remained the same as in 2022, particularly when it comes to emissions-reduction targets that are used by 49% of the asset owners surveyed.
While the majority of asset owners believe that using an established climate-related target-setting framework has a real impact on emissions levels, 34% disagreed and 43% see too much discretion in selecting climate-related targets.
For 55% of asset owners, climate-related factor integration contributes more to portfolio decarbonization than to real-world emissions reductions. And 51% agreed that financial institutions have a responsibility to help fund the decarbonization of high emitters.
While only 40% of their funds currently own or manage transition finance investments, 35% expect to make to do so within the next 12 months, and 60% of consultants said they advise clients to make them, even where this could increase portfolio carbon intensity.
"The energy transition is undoubtedly the biggest systemic shift of this generation," said Nazmeera Moola, chief sustainability officer at Ninety One, in an emailed comment about the research.
"The universe of investment opportunities has exploded to build the foundations of a new era and support the development of market leading innovations. Transition finance is being clearly recognized for its real-world credentials over and above meeting portfolio decarbonization targets," Moola said, but she cautioned that investors need to capture the full picture of their portfolio's emissions to measure climate impact.
