Asset managers must work to “close the gap between the words [they] use and what [they] deliver in practice”, said Redington’s head of sustainable investment this week.
In its latest survey, the investment consultant found that while the majority of asset managers have publicly committed to net-zero or similar climate goals, they are only engaging with a small percentage of their portfolio companies on these topics.
On average, asset managers engage with less than 20 per cent of their portfolio on climate change, and around 15 per cent on net zero carbon emissions, according to Redington.
Asset managers are also being encouraged to invest greater sums in ‘blended finance’ vehicles, such as projects that finance emerging market countries on the road to lower carbon emissions.
Emerging and frontier markets currently face an investment gap for their energy transition, with roughly USD9 trillion needed for these countries to derive two-thirds of their energy from renewable power by 2050.
A multi-trillion group of investors including Allianz, Natixis, State Street Global Advisors, and Ontario Teachers’ Pension Plan, has published a ‘blueprint’ for enticing more private investment into these projects.
Most of the group’s recommendations take aim at improving the risk-return profile of these investments – including by creating a rolling pool of funds to help the private sector cover currently hard-to-insure risks, and a special facility to deal with FX risk.
Meanwhile, USD465 billion manager RBC Global Asset Management is building its green infrastructure exposure in its emerging markets equity portfolios.
Environmental risks represent “increasing sources of both opportunity and risk” for investors, says the asset manager, adding that emerging markets stand to be “disproportionately affected” by climate change.
Renewable energy, electric vehicles (EV) and transmission metals are the most attractive sectors for investment, according to RBC GAM.
“We believe [green infrastructure] is a multi-decade growth story and we want to increase our exposure to this theme across all our portfolios,” says a portfolio manager on the EM team at RBC GAM.
Madeleine Taylor
Editor, Institutional Asset Manager