The Investor Group on Climate Change (IGCC) has released the findings from its latest Net-Zero Investment Survey, canvassing the views of 38 respondents across superannuation funds, asset managers and sovereign wealth funds, representing $1.5 trillion in assets under management.
The study, which is in its fourth year running, found that 30 per cent of investors are increasingly setting portfolio-wide goals for net-zero emissions while 40 per cent are considering the move.
Most investors (70 per cent) were targeting single asset classes (70 per cent) or are working across their portfolios (35 per cent) to achieve net-zero, climate-aligned or green investment strategies. Use of responsible investing offerings as central climate strategies has begun to decrease, with only 25 per cent employing them.
IGCC chief executive Emma Herd reported the group is seeing further progress towards the “mainstreaming” of climate investment in business, with it becoming the norm across investor decisions and strategies.
“Whereas past trends had shown a preference to use responsible investment offerings in climate change goals and strategies, this is now on the wane as investors move to targeting net-zero emissions investment,” Ms Herd said.
“Where climate goals and strategies are being applied, single asset and portfolio-wide options are more likely pillars, bringing them into core investor decisions. This is a natural progression as investors sharpen their understanding of the financial risks climate change poses to their portfolios and the investment opportunities the transition to net-zero emissions will create.”
Despite the growing ambition, only a quarter of asset owner respondents signalled they have devoted climate change mandates with external managers.
Ms Herd commented that investors should however be implementing more “ground up strategies”, with the potential for asset owners to apply more climate mandates to external managers, and more detailed target setting.
Policy uncertainty was cited by two-fifths (41 per cent) as barrier to low-carbon and climate-aligned investment, as well as a lack of opportunities with appropriate risk-return profiles (41 per cent).
“While the Australian government’s recent announcements on technology development are a welcome step, there is a clear need to establish a national goal for net-zero emissions by 2050,” Ms Herd said.
The Australian government should be looking to embed a net-zero goal in a “national decarbonisation plan to attract to domestic markets the trillions of dollars in private capital investors are looking to deploy into renewable energy, clean technologies and green infrastructure,” she added.
But COVID’s market political disruption failed to slow organisations’ pursuit of climate-linked investment for 70 per cent of survey participants.
“The fact that progress on climate risk has continued in this environment is a reminder that these trends are likely inevitable and irreversible, and will only accelerate in coming years,” Ms Herd said.
