At a glance
- Net Zero Investor says its analysis of public disclosures and investment strategies shows asset owner demand for opportunities in hard-to-abate sectors is set to rise.
- Owners that rework an interim emissions trajectory are more willing, on this evidence, to hold higher-emitting assets, the trade-off hard-to-abate sectors require.
- Net Zero Investor says the evidence suggests transition investing is being implemented in addition to climate solutions investing, not as a replacement for it.
Asset owners that revise their interim portfolio emissions targets are more likely to adopt transition investing plans, according to the inaugural Climate Capital Allocation Index published by Net Zero Investor on 21 October.
The pilot edition covers 22 asset owners, arranged along two strategic tilts: Reducing Financed Emissions at one end and Financing Reduced Emissions at the other. Net Zero Investor says its analysis of public disclosures and investment strategies shows asset owner demand for opportunities in hard-to-abate sectors is set to rise.
Owners that rework an interim emissions trajectory are more willing, on this evidence, to hold higher-emitting assets, the trade-off hard-to-abate sectors require. "Asset owners are realising that when portfolios decarbonise faster than the world outside them, long-term climate risks remain unmitigated," said Atharva Deshmukh, Net Zero Investor's head of research and the report's lead author.
Net Zero Investor says the evidence suggests transition investing is being implemented in addition to climate solutions investing, not as a replacement for it. Asset owners in the index also expect fund managers to expand engagement with high emitters and assess the credibility of corporate transition plans.
Strategy shifts, mandates still open
Net Zero Investor characterises the shift in climate capital allocation and manager selection as the biggest in decades. The published summary does not quantify that claim, name participating asset owners, or report allocation figures.
A FTSE Russell survey this month found 84% of asset owners say they incorporate sustainability into investment decisions, while investment flows have yet to follow. A separate IFM survey reported on 5 October found 81% of investors eyeing transition-linked private assets; pension funds and insurers made up most of the 700 respondents there.
The pilot records strategy, not mandates, so whether owners revising interim targets go on to award transition mandates is the open question.
Reported by the Who's investing desk from Net Zero Investor. Published . Corrections