Investment Trends

Climate Change On Institutional Investors’ Minds

Institutions are making broader commitments to net-zero goals

A new Cerulli Associates report uncovers key trends impacting the institutional marketplace, which includes private and public pensions (DB and DC), endowments, foundations, insurance general accounts, and subadvisory. Access the complete report here.

February 14, 2024, BOSTON—In response to the increased attention to climate change risk, institutional investors, asset managers, and asset owners are committed to implementing a variety of measures to address climate change and reach their net-zero goals, according to the latest Cerulli Edge—U.S. Institutional Edition.

Cerulli’s finds while just 14% of asset owners have a formal net-zero commitment, another 25% plan to make one in the next 12 months. In addition to institutions making broad commitments to net-zero goals, Cerulli data reveals that many are taking other actions related to carbon, sometimes overlapping or tangential to the net-zero goal. Nearly one-third (30%) of institutions are investing in strategies that support transition to a carbon-neutral economy, and another 36% plan to over the next 12 months.

Additionally, half of institutions are either divesting (29%) or plan to divest (21%) from fossil fuels. When undertaking responsible investment strategies, institutions continue to prioritize addressing the issue of climate change (61%) as the top theme.

Despite these efforts, investors continue to face difficulties analyzing and reporting on the carbon footprint of their underlying investment portfolios. The lack of data standardization across third parties and publicly available tools makes it challenging for investors to get a clear picture of exposure and ensure alignment with their climate change commitments.

New platforms, including the Net-Zero Data Public Utility (NZDPU) database, are expected to come to market to establish more reliable, accessible, and comparable climate data across various industries for investors. “The development of such platforms will provide investors with more complete information about their exposure to climate-related financial risk,” says Gloria Pais, analyst. “Looking ahead, Cerulli anticipates an increase in industry partnerships with current disclosure platforms to enhance consistency and provide managers, investors, and other industry professionals with the data they need.”

 

 

 

About Cerulli Associates
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Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.