On a global basis, 29% of respondents have committed to net zero by or before 2050 and are implementing a strategy with interim targets; 10% have committed to net zero but have yet to put actions in place; 11% said they have committed to reach net zero after 2050; 11% have made a commitment to reduce emissions but not to net zero; and the remaining 19% said they have not committed but are currently drafting plans to do so. The data did not total 100% due to rounding.
Last year, Schroders asked investors where they were on their net-zero strategy, with 37% committing to reaching net zero by 2050; 21% committing to reduce emissions but not to net zero; 25% exploring the transition but not yet committed; 15% having no viable pathway to transition or not considering it; and 2% having already achieved a net-zero business model.
One area that investors from different regions agreed on in this year's survey was that more support is needed in measuring and tracking net-zero pathways. About half of respondents (51%) think their organization needs support in these endeavors, up from 37% last year.
The study also found that geopolitical uncertainty and inflation remain the top concerns for global institutional investors when it comes to having an impact on portfolios for the coming year, despite expectations last year that these issues would subside.
Across global investors, 55% said geopolitical uncertainty would have the greatest influence on their overall portfolio's performance, followed by inflation (53%) and the tightening of monetary policy (48%).
However, the top three concerns varied depending on where investors were domiciled. Among North America-based investors, the concerns were geopolitical uncertainty (51%), rising inflation (50%) and tapering monetary policy (48%), as they were for Asia-Pacific investors although in a different order: rising inflation (55%), geopolitical uncertainty (52%) and tapering (51%).
While Europe, the Middle East and Africa-based investors agreed that geopolitical uncertainty (59%) and rising inflation (53%) were leading concerns, 46% said stagflation would have an influence on portfolios. The final cohort of investors, based in Latin America, cited the tapering of monetary policy and rising inflation as having influence over portfolio performance in the next 12 months (60% and 53%, respectively). However, cyberattacks tied among concerns for investors with tapering, at 60%, and the rise in populist policies tied with rising inflation, at 53%.
Schroders said in a news release that the continued concern over rising inflation was unsurprising given that decarbonization, changing demographics and deglobalization all have the potential to keep inflation high. Those changes are also driving changes in portfolio allocations: In response to the continued breakdown of globalization, more than half of respondents think investors will look to invest in companies with more localized supply chains. The best opportunities in terms of that theme are expected to be found in developed markets equities (32%) and private equity (23%).
Private assets also continue to be a focus for investors, with the leading driver being the diversification benefits they bring over the medium term, according to 65% of respondents. As such, one-third of investors expect to increase their allocations over the next two years.
"Markets continue to be caught in the cross currents of concerns about rate increases and worries about recessionary risks," said Johanna Kyrklund, group CIO and co-head of investment, in the news release. "The study found that institutional investors' allocations to equities may increase as they look to capitalize on the opportunities presented by the deglobalization, decarbonization and demographic trends. With concerns about high inflation and high interest rates, valuations matter. A renewed focus on valuations rather than speculative growth may be required," she said.
Schroders had $923.1 billion in assets under management as of June 30.
