Robeco, an investment firm with €176bn in assets under management, has published a survey on how investors approach the opportunities and risks associated with global warming. Robeco commissioned CoreData Research to poll 300 of the world’s largest institutional and wholesale investors, which collectively have €23.4trn in assets under management.
The survey found that global warming is already a key strategic element for 73% of those polled. Just two years ago, the figure was only 33%. And in the near future, climate questions will be a key element of the investment process of 86% of respondents. Two years ago, 26% of investors did not take climate change into account. Today, only 3% do not.
Figures varied based on the geographic origin of investors. 68% of European investors have formally adopted this approach. That compared to 43% in North America and 36% for Asia-Pacific. Nevertheless, the laggards are catching up: 26% of North American and 27% of Asia-Pacific investors said they want to implement climate policies within the next 12 to 18 months. “The green policies of new US president Biden, coupled with China’s determination to be seen to set the global agenda, and the forthcoming UN climate change conference in November 2021 in Glasgow (COP26), could drive progress at institutional and wholesale investors globally."
One of the possible paths to a low carbon economy is to set carbon neutrality goals. While the number of investors who have already set such a target is still low (17%), it is growing rapidly and should reach 52% within five years. This change will take place mainly in Europe and North America, where, in these two regions, more than 60% of investors plan to adopt a zero carbon target within this timeframe. The Asia-Pacific region is lagging behind, with just 29% of investors planning to follow suit.
The third axis in this awareness: the need to decarbonise and support the transition from dependence on fossil fuels to a low carbon economy. The study indicated that divestment of carbon-intensive assets will increase sharply over the next five years, although from a low base. Currently, globally, 40% of investors have not reduced their carbon-intensive assets over the past five years. That figure should drop to 20% within five years.
The study revealed a clear demand for expertise, support and more specialised education on global warming. Globally, 44% of respondents considered the lack of data and information to be the main obstacle to the implementation of decarbonisation. This percentage is even higher in Europe (58%). In the Asia-Pacific region, the dearth of low-carbon investment strategies was the greatest concern (54%), and in North America, the lack of internal subject-matter expertise was seen as the greatest challenge (45%). As a result, these gaps in understanding the key issues leave many investors confused, unsure of where to start or how to make a difference.