Investors Increasing Focus on Climate Solutions and Transition Strategies: Robeco Survey
Investors are shifting the focus of their climate investing strategies, with the majority looking to allocate funds to climate solutions and to strategies focused on ‘brown-to-green’ companies transitioning to lower emissions, according to a new survey released by international asset manager Robeco, which also found growing regional disparities in attitudes towards climate change, with North American investor interest lagging increasingly far behind their European and Asia Pacific peers.
For the study, “Global Climate Investing Survey 2024,” Robeco surveyed 300 institutional and wholesale investors across North America, Europe and Asia Pacific, at organizations ranging from insurance companies, pension funds and private banks, to endowments and foundations, sovereign wealth funds, and family offices, collectively representing nearly $29 trillion in assets under management.
Overall, the survey found that while the majority, 62%, of investors reported that climate change is a central or significant part of their investment policies, this figure declined from 71% last year. The decline was driven primarily by a sharp drop among North American investors, declining to only 35%, from 61% in the prior year, while European more than three quarters of European investors describe climate change as significant or central to their investment policies, dipping slightly from last year, while Asia Pacific investors reported an increase to 79%, from 73%, surpassing their European peers for the first time.
The regional differences were similarly reflected in the investors’ policies and actions, with the proportion of investors with public commitments to achieve net zero in their portfolios by 2050 falling to 13% from 19% last year in North America, while remaining stable at 37% in Europe, and growing to 26% from 20% in Asia Pacific. Similarly, 55% of North American investors reported that they are not taking any climate-related engagement action with portfolio companies, compared to only 22% of European and 26% of Asia Pacific investors, as an anti-ESG backlash in the U.S. has led to increasing investor caution on the topic.
Notably, the survey found that investors in every region expect to see a sharp increase in focus on climate change going forward, with 77% overall – including well over half of North American respondents – reporting that they expect climate change to be a significant or central part of their investment policies over the next 2 years.
The survey also provided insight into investors’ evolving approach to climate-related investing, with a growing interest in investments in climate solutions and transition strategies. Nearly half (48%) of respondents reported that they are currently allocating to funds that invest in climate solutions, with another 25% planning to do so over the next two years. Additionally, while only 37% reported that they currently invest in strategies targeting high-emissions companies with credible transition plans to lower carbon emissions, another 26% said that they plan to do so over the next two years.
Lucian Peppelenbos, Climate and Biodiversity Strategist at Robeco, said:
“The transition among corporates and others from brown to green, as they decarbonize, cannot take place without the active involvement of investors, rewarding those making the change and withdrawing support from the unwilling or reluctant.”
Notably, the survey found that insurance companies, which Robeco said tend to be early adopters of climate investing approaches, were the most likely to already be allocating to climate transition strategies, at 47%, with another 27% planning to.
The survey also examined the investors’ approaches to investing in transitioning companies, with 45% reporting investing in active equity strategies specifically targeting transition-oriented companies, and 43% investing in green or sustainability bonds.
In the report, Mark van der Kroft, Chief Investment Officer, said:
“Transition finance is essential, not only for green projects like solar panels and wind farms but also to support businesses and industries that need to transition to cleaner technologies and increased energy efficiency over time. Companies preparing for a low-carbon future will be better positioned for long-term success and profitability.”
Click here to access the survey.