Investors are focusing on sustainability and private assets in the midst of energy transition opportunities while inflation concerns persist, revealed a survey.
More than half of investors expressed concerns about geopolitical uncertainty and inflation, prompting them to invest in companies with localised supply chains across public and private markets, showed the Schroders Institutional Investor Study 2023. Investors identified developed market equities (32%) and private equity (23%) as the best opportunity providers over the coming years.
In the next two years, 35% of respondents plan to increase allocations to private assets, as two-thirds see this asset class as the best way to engage in trends like the energy transition and impact investing while offering deeper diversification.
Around half of global investors considered infrastructure or renewables as the best placed to capture energy transition investment opportunities in the medium term, encouraging them to allocate to the asset class.
Most investors said that sustainability and impact strategies would help them achieve long-term financial goals, with 43% citing a desire to positively impact people and the planet as a driver for sustainable investing.
More than two-thirds (67%) of global respondents considered it likely or highly likely that the energy transition will spur investment in innovation, creating significant investment opportunities.
Two-thirds of respondents expressed interest in new sectors like nature-based solutions and green hydrogen for diversification and expansion into new themes and assets.
Respondents considered infrastructure (44%) and natural capital & biodiversity (41%) as the most suitable private asset classes for achieving their sustainability and impact goals.
Measurement emerged as the main obstacle to investing in private assets focused on sustainability.
The survey revealed that investors in Europe, Middle East and African are dedicated to achieving net-zero emissions by 2050 or earlier, employing interim targets. Most respondents without such commitments were from the US.
Nils Rode, CIO, Schroders Capital, highlighted that investors know that private assets are connected to long-lasting trends driven by advancements in AI, the ongoing energy transition, decarbonisation, and demographic changes. “In the case of debt, the retrenchment of banks has seen the demand dynamics shift in favour of private lenders who can set preferential terms and secure strong returns,” he added.
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