Over three-quarters of investors expect the transition to be ‘disorderly’ as more investors allocate funds to climate strategies over transition plans, according to Robeco’s fourth annual survey.
The 300-investor survey – Realism on transition journey – found only 15% expect an orderly transition in which governments and markets work together to cut emission, while 8% expect a ‘hot-house world’ in which very little action is taken to avoid global warming. Further, just 30% of investors believe the Paris Agreement 2-degree goal is achievable.
As a result, investors are allocating more funds to general climate strategies rather than those focusing on transitioning companies. Only 37% are investing in strategies targeting companies with credible transition plans, although a majority (63%) plan to do so in the next one to two years.
Also, this ‘disorderly’ transition view influences the preferred investment style. Some 45% of investors are using active equity strategies that specifically target allocations to transition-oriented companies, while 43% are investing in green bonds or sustainability-focused bonds.
Overall, insurance companies stood out for making net-zero commitments compared to other institutional and wholesale investors as 39% of insurers have made a public commitment. This is best explained by their exposure to climate change from both sides of the balance sheet.
The survey also highlighted the wide regional differences in attitudes towards climate investing. Overall, 79% of Asia-Pacific (APAC) investors place climate change at the centre of their investment policy, surpassing Europe by 3%.
Yet, enthusiasm falls in North America over the perceived cost of integrating ESG factors into investments, where 35% prioritise climate investing. Although this reduced the global average to 62% from 71% in 2023, this statistic suggests that a majority of investors still prioritise climate investing.
Lucian Peppelenbos, climate and biodiversity strategist at Robeco, said: “The survey findings show that many investors are adopting a focused and diligent approach to the work of decarbonising investment portfolios and moving towards the low-carbon economy of the future.
“As they get to grips with the hard work involved in the climate transition, there is less naivety, and more careful deliberation and scrutiny over what is needed to embed sustainability into the many aspects of running investment portfolios.”
