Despite regulatory uncertainty over future growth in Australia, institutional investors have shown an increasing appetite for climate investment opportunities, according to a new survey of institutional investors released today by the Investor Group on Climate Change (IGCC).
Institutional investors, managing more than $1.3 trillion in assets, have provided new insights into how they are approaching low carbon and green investment opportunities and where they are active by market and asset class in the new report Accelerating Change.
“Despite recent political upheavals, investors in Australia and New Zealand are focused on finding low carbon opportunities and getting deals done”, said Emma Herd, Chief Executive Officer of the Investor Group on Climate Change. She added “Climate-aligned investment is continuing to accelerate. Investors are actively looking for opportunities to support climate solutions and embed climate change into whole of portfolio management.”
The report found that 90% of the investors surveyed are implementing low carbon strategies and 50-80% of investors surveyed are undertaking or are actively considering low carbon investment across most asset classes.
In addition, over 80% of investors are actively considering reporting under the Taskforce on Climate-related Financial Disclosures.
Investors are looking to diversification and looking for ways to allocate capital across a broad range of classes, including listed equities, private equity, fixed income, infrastructure, timber, forestry and agriculture, and real estate.
Potential barriers to climate investment have also increased relating to the increased investor activity, for example lack of investable deals at scale and policy uncertainty remain major barriers to increased investment. In addition, in light of increased policy or regulatory uncertainty in key markets, investors go offshore to find climate investment opportunities, and they increase active engagement with companies they own.
The survey found that when faced with policy uncertainty, more than 40% of investors redirect investments to jurisdictions, sectors or markets with less uncertainty, and nearly 60% increase company engagement to manage climate-risks across their portfolios.
The widespread adoption of the final recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) by investors is impacting the investor practice, through increased target setting and public commitments.
“The research results for this year’s report highlights that institutional investors clearly understand the urgency for climate-aligned investments that shift capital towards a modern net zero emissions economy aligned with the goals of the Paris Agreement.” said Nicole Bradford, Portfolio Head, Responsible Investment at Cbus.
“Climate change entails an array of financials risks and also opportunities, which PIMCO’s investment strategy seeks to manage and harness on behalf of our clients. We view the energy transition and global temperature rise as of utmost importance for fixed income investors, considering the ever-growing evidence of meaningful economic impacts and credit risks. We are pleased to see that Australian and New Zealand investor’s appetite for climate solutions remains strong and that alignment of investment with the UN Sustainable Development Goals has emerged as a strong area of focus.” said Olivia Albrecht, Head of ESG Business Strategy at PIMCO.