Improving guidance for asset owners

About half (51%) of asset owners rely on consultants for advice about climate-related investments, so consultants can play an important role in supporting the growth of transition finance.

For their part, 58% of the consultants in our survey believe that transition finance will be needed for their clients to achieve their climate-related objectives, and 58% are seeking to encourage clients to consider transition-finance investments.

“It’s a different set of skills and knowledge and experience you need for emerging markets, which I would say is sometimes missing with investment consultants,” says a senior leader at a European asset owner. “This creates a barrier for us and makes it appear — incorrectly — as if we intentionally neglect some regions in favour of developed markets where we have more confidence in the advice we can access.”

More than a third (35%) of the consultants we surveyed say that their clients do not consider transition finance to be an important climate-related investment approach. And 30% say that their clients do not have an adequate understanding of transition-finance investing — rising to 36% for emerging markets.

Asset owners need more from consultants

Meanwhile, a third of asset owners (34%) say that consultants do not consider transition finance to be an important climate-related investment theme. The same proportion say that consultants do not have an adequate understanding of transition-finance investing — rising to 37% for emerging markets.

Some 47% of asset owners say that their fund is seeking additional consultant relationships to provide deep expertise in transition finance investments, and 53% are seeking deep expertise on transition-finance investments in emerging markets.

Advice on transition finance

Our survey shows that 70% of consultants say they have the skills and experience needed to advise on transition finance, while 55% say the same about transition finance in emerging markets.

Asset owners make it clear they are looking for more specific expertise from consultants — particularly in transition finance.

Rating the quality of advice between consultants and asset owners
(proportions reflect those rating advice given/received as ‘very strong’)

Note that consultants were only asked to rate types of advice that they said they provided.

Some asset owners do not use consultants. OPTrust is one example of this approach. “We do all that analysis in house,” says Alison Loat, the Canadian pension plan’s managing director, sustainable investing and innovation. “We have a lot more control. For example, we are able to make use of customised due diligence to understand how climate considerations are manifesting specifically in each of our asset classes.”