Energy crisis highlights importance of backing renewables, finds survey

Asset manager Robeco’s annual climate survey has found that the energy crisis has underlined the importance of renewables for 51% of investors, but only 30% have accelerated decarbonisation efforts. The survey also covered actions that investors would find helpful to shift towards sustainability.

Conducted by CoreData Research, Robeco’s third climate survey investigates how investors approach the opportunities and risks associated with climate change, the company said in a press release published on 21 March. The survey covered 300 institutional and wholesale investors–such as pension funds, insurance companies, private banks/bank trusts, or wirehouse brokers/dealers–in Europe, North America, Asia Pacific and South Africa. The respondents represented a total of around $27.4trn in assets under management.

“The Climate Survey shows that investors are progressing in implementing their commitments to net zero and stepping up on biodiversity, while at the same time navigating challenging energy markets and political pressures,” said Lucian Peppelenbos, climate & biodiversity strategist at asset manager Robeco. “While a lack of knowledge and data can still create barriers for implementation, we need to act now because as investors we have the means to put money to work where it can make a difference.”

Delano took a closer look at the report for some key takeaways.

48% of investors committing to net zero by 2050

The survey found that globally, more investors have made, or are making, a public commitment to net zero by 2050 compared to last year. The increase, however, is slight: 48% in 2023 compared to 45% in 2022.

Most investors (55%) assess the impact of their portfolios on carbon emissions, found the report. But only 20% of investors measure indirect emissions, such as business travel or waste disposal.

In addition, 36% of survey respondents said that they had already or were very likely to increase allocations to funds/strategies specifically investing in climate solutions in the next 12 months in order to decarbonise their investment portfolio. 35% said that they already had or would increase allocations to funds/strategies with a low-carbon approach.

A majority of investors expect the asset management industry to help with decarbonisation, found the survey. Over half of respondents (53%) wanted the asset management industry to offer low-carbon versions of core equity and fixed income holdings, up from 34% in 2022. 52% wanted the industry to offer more impact investing related to decarbonisation, an increase from 31% in 2022.

Renewables important, but investors unwilling to miss out on oil and gas returns

Although the energy crisis and the recent increase in energy prices have underlined the importance of backing renewables for half of the investors surveyed (51%), only 30% have accelerated decarbonisation efforts of their portfolios. In fact, 47% of investors have reviewed their ESG approaches to avoid short-term losses and underperformance, noted the report.

Over one-third (38%) of investors in Europe, 48% in North America, and 59% in Asia Pacific have been allowing higher allocations to oil and gas companies in the short term, spurred perhaps by an unwillingness to miss out on strong returns in the fossil fuels sector.

That being said, the survey also found that divestment from carbon-intensive assets have increased. Wholesale investors with a traditional model portfolio, for example,  divested 8% of their overall portfolio from carbon-intensive assets during the last 12 months when asked in 2022, compared to 27% in the 2023 survey. In this same category, when asked during the 2023 survey, wholesale investors estimated that they expect to divest 28% of their portfolio next year (up from the response of 13% in 2022).

67% say just transition will be part of investment policy in two years

According to Robeco’s survey, 45% of investors plan to find, or have already found, suitable investment opportunities that have environmental and social goals. 42% use, or already use, thematic investments that target a just transition, such as green bonds or impact investments, and 41% integrate or are very likely to integrate the just transition into investment strategies.

Respondents expect the just transition to increase in importance in their investment policies in the next two years. 48% said that the just transition is at the centre or a significant factor of their investment policy today; this figure increases to 67% when looking at their investment policy in the next two years.

Biodiversity becoming major concern

The survey found that 48% of investors say that today, biodiversity is at the centre of their investment policy or a significant factor in their investment policy. This figure increases to 66% when asked about how important they think biodiversity will be in two years.

The leading asset classes for biodiversity integration are equities, green bonds and private markets, but the biggest obstacles to implementation are a lack of data and ratings (53%), insufficient internal expertise (41%) and insufficient demand from end investors (35%).

60% of survey respondents said that offering more impact investing related to biodiversity could help with biodiversity. 57% said more thematic investing related to biodiversity would help, and 56% said that biodiversity-positive versions of core equity and fixed income holdings would help.

ESG faces political pressure

30% of investors in Europe are concerned about political and legal resistance to their sustainable investment plans. This figure, however, climbs to 47% for investors in North America.

The survey also found that 63% of respondents in Europe are more concerned about future political pressure and/or legal actions if they do not take positive action on issues such as climate change and other ESG issues, compared to 57% in Asia Pacific and 40% in North America.