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The amount of these pension funds’ actual investments labelled as “sustainable” rose to $276 billion in 2021, up from just $163 billion a year earlier. The dashboard shows that sustainableinvestments composed nearly 13% of the pension funds’ total assets of $2.2 trillion, versus just 7% of $2.1
While some investments are neutral (deemed neither “clean” nor “dirty”), in many cases these companies are still investing most of their capital into assets that will either lock in further GHG emissions or become strandedassets as the energy transition takes shape. dollars) through 2030. Whereas just 2.7%
ESG-related assets under management are projected to exceed US$50 trillion in 2025, reflecting the growing demand for sustainableinvestments. By investing in companies with nature-positive strategies, asset managers can hedge against biodiversity risks while generating returns aligned with sustainability goals.
While these are welcome steps in the right direction — given the recent backtracking among US asset managers on prior climate commitments — there are significant questions about how these companies can deliver risk mitigation results for their clients when stewardship teams are split.
The evolving climate drives physical risks—damaged or strandedassets and business-interruption costs from severe weather events. Climate Value at Risk (CVaR)* is the economic value of physical and transition risks plus technological opportunities—one way of measuring the financial impact of climate change.
” Julie Gorte, Senior Vice President for SustainableInvesting at Impax Asset Management, advises asset owners to consider the upsides of this challenging and complex transition. Risk of strandedassets Many major asset owners and managers have vociferously supported the treaty.
The firm also said both the climate global bonds and global green bonds strategies incorporate “various sustainableinvestment elements from Robeco’s SI toolbox”.
Financial organisations thus have a major role to play in the decarbonisation of the global economy, yet it is estimated that since the Paris Agreement in 2015, the 60 largest banks have instead invested $5.5 Clearly much more needs to be done to pivot towards more sustainableinvestment and lending practices.
Research predicts new demands on asset managers, as clients’ sustainableinvestment priorities mature. Institutional and intermediary clients’ sustainableinvestment demands are growing increasingly sophisticated, requiring managers to reappraise their skills and budget levels. A long way to go”.
This week’s blog marks the first anniversary of Russia’s invasion of Ukraine by noting five of the changes it has wrought to sustainableinvesting. A selection of this week’s major stories impacting ESG investors, in five easy pieces.
Asset managers are meanwhile showing “mixed progress” in their implementation of the Guidelines, though most asset managers recognise the relevance and urgency of environmental risk, and have put in place frameworks, governance arrangements, and policies to oversee this risk.
A large and growing share of that investment capitol is going towards impact investments. In an interview with Private Equity International (PEI), Tania Carnegie, the Global Private Equity and Asset Management Leader for KPMG Impact, said she is confident about the future of impact investing.
Dr Tom Gosling, Executive Fellow at London Business School, has argued that some asset managers are effectively pulling their punches on net zero, holding off on implementing their collective and individual commitments, awaiting stronger policy direction from politicians. Lee suggests not. “In
“The sector is responsible for a big portion of the world’s methane emissions, and the technology already exists to avoid these,” explains Aeisha Mastagni , Senior Portfolio Manager in CalSTRS’ SustainableInvestment and Stewardship Strategies Team. It’s also a sellable GHG product for oil and gas firms.
It’s like, “OK, companies, are you going to have strandedassets in the future? The asset you say is going to be worth something in 40 years, if it’s underwater in 10 because of increased flooding, then it’s not worth anything to us.” It’s data that should go into analysis. So what’s the issue? I don’t know.
Only if engagement and voting don’t work would there be a need to divest, given the risk of strandedassets on the balance sheet, she noted. . Luke Ellis, CEO of Man Group, observed that too often engagement encourages companies to sell parts of their assets that are considered “bad from an ESG viewpoint”. Data tools .
A sister of responsible investment is Impact Investing , which is a more proactive approach in investing with the ‘ intention to generate positive, measurable social and environmental impact alongside financial return.’ Differences in Interpretation The question of responsible investing is defined differently across cultures.
trillion annually, has attracted just US$13 billion in sustainableinvestment during the past decade. This explainer looks at the calls for a ‘sustainable blue economy’ and the role investors can play. The ocean economy, estimated to be worth US$2.5 What is the scale of the problem?
Increasing gas infrastructure must be avoided to avert dangerous climate impacts and strandedassets.”. By including gas, the EU is “giving the false impression that gas is ‘green’, which might lead to the wrong investment decisions” and potentially “delay the large-scale investments we need into renewables”, says Diamantopoulou.
Policy reform, best practice and legal judgments are redefining the relationship between fiduciary duty and sustainableinvestment. In late April, the UK High Court ruled that charity trustees can consider climate change factors when making decisions over their investments, even if it means making lower returns.
Warwick Thompson says it is vital to reduce reliance on fossil fuels to minimise the risk of strandedassets. “The government needs to ensure the right policy landscape and incentives are in place in the economy for private finance to flow to the right areas, and away from the continued expansion of fossil fuel production,” he says.
Some companies will start acting and some won’t; there’s more risk of strandedassets.” What role should investors play? Where there’s a challenge (fulfilling the IMO’s 2023 decarbonisation strategy), there’s opportunity (investing in solutions that will enable the sector to achieve net zero)
Mixed picture Do climate-related disclosures provide investors with the decision-useful information they need as they seek to reduce portfolios emissions while orientating capital to climate-positive investments? This has echoes of the issue of strandedassets arising from decarbonisation of the energy supply over the past decade or so.”
With nature more broadly, there are further layers of complexity,” said Eric Nietsch, Head of SustainableInvesting, Asia, Manulife Investment Management. For investors and companies with assets within those key biodiversity areas, this raises the issue of strandedassets.
C or below will leave a substantial amount of fossil fuels unburned and could strand considerable fossil fuel infrastructure. Depending on its availability, CCS could allow fossil fuels to be used longer, reducing strandedassets.”. What is carbon capture and storage?
Sustainable capitalism also invites efforts to reinforce sustainability as a fiduciary issue, create advisory services for sustainableasset management, expand the range and depth of sustainableinvestment products; reconsider the appropriate definition for growth beyond GDP and integrate sustainability into business education at all levels.
To the contrary, investors, individual and institutional, large and small, are broadly interested in sustainableinvesting, a range of investment approaches that use ESG information. Surveys show anywhere from half to 85% of investors indicating interest , and the percentage is consistently higher for those under 50.
James Alexander, CEO of the UK SustainableInvestment and Finance Association (UKSIF), says the TPT’s proposed scope should be extended beyond large listed companies to include “large comparable private companies and unlisted firms because, realistically, these firms have the same level of impact”. .
Heidi Welsh, Executive Director at the SustainableInvestments Institute, which co-authored the Proxy Preview report, said the combination of stronger support for ESG-related votes at last year’s AGMs and the likelihood of fewer omissions this year may lead to an increased number of resolution withdrawals. .
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