Planetary Pulse: Targeting effectiveness

Asset owners weigh risks and opportunities of investing for an inclusive energy transition.

Are asset owners moving from decarbonising their portfolios to reducing emissions?

Planetary Pulse reveals the findings from new primary research into real-world impact and transition finance. It is based on a survey of 300 senior professionals at asset owners and advisors around the world, including pension funds, insurers, endowments, foundations, central banks, sovereign wealth funds and consultants.

Planetary Pulse visualised

Planetary Pulse Data Viz
2023 regional highlights

United Kingdom highlights

At 69%, UK-based respondents are the most likely across regions to have at least 25% of their AUM invested in portfolios with climate-related instructions or objectives.

More than half of respondents (54%) use emissions reduction as a target, with 46% applying it at whole-portfolio level. UK respondents (who, since Brexit, no longer need to abide by the EU’s SFDR regulation) are the least likely across regions to apply specific targets at individual fund level within the next 12 months (23% vs 45% globally).

UK respondents are the most confident of the relevance of their net-zero frameworks, with 69% claiming that established climate-related target-setting frameworks ensure real-world emissions reduction. The most-followed guideline (50%) is the Target-Setting Protocol (TSP) developed by the Net-Zero Asset Owner Alliance (NZAOA).

Investments in the UK are structured with portfolio decarbonisation outcomes in mind, rather than real-world emissions reduction. Climate-related factor integration, the practice most widely implemented in the UK (62%), is viewed as contributing strongly to portfolio decarbonisation (63%), but only 50% say the practice contributes to real-world emissions reduction. Moreover, portfolio construction, viewed by 82% as the practice contributing the most to real-world emissions reduction, scores only 36% on its contribution to portfolio decarbonisation.

While there is relative pessimism regarding returns on climate-related investments, with nearly half (46%) believing they offer lower returns than conventional investments, future opportunities in transition finance for emerging markets are met with enthusiasm: 65% believe this sphere represents a major commercial opportunity for asset owners.

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FT Longitude research paid for by Ninety One.

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