Rising fears about the impact of climate change on portfolios mean that two-thirds of EMEA investors now believe they need to “completely rethink” how they invest, new data reveals.
A survey by the $1.2 trillion asset manager Nuveen has shown that 66% of institutional investors across Europe, the Middle East and Africa believe there is a greater need to “completely rethink portfolio construction strategies”, as their concern about the impact of rising temperatures on their portfolios grows.
A total of 64% of EMEA investors said they were more concerned today than just two years ago about the possibility of extreme weather events disrupting investment strategies, while half believe that fundamental long-term market dynamics had “lost relevancy”.
The data also showed that most investors acknowledge the direct link between climate change and investing, with 84% of investors and consultants in the EMEA region agreeing that the transition to a low-carbon economy is inevitable, and 87% expecting it to present new investment opportunities.
More than three-quarters of EMEA investors (79%) said they already considered environmental, social and governance (ESG) factors when making investment decisions, with 12% planning to within a year.
This suggests the region is ahead of Asia Pacific, where 71% of investors already embedded ESG considerations into their portfolios, with 20% planning to consider them in the next year.
Elsewhere, the survey showed that 45% of EMEA asset owners and consultants had set clear goals and targets for hitting diversity, equality and inclusion metrics, with another 30% considering these steps.
Amy O’Brien, global head of responsible investing at Nuveen, said the recent IPCC report on climate change stated that the world had a “brief and rapidly closing window” to adapt to global warming, and that the world is on track for 3 degrees Celsius – higher than the upper 2 degrees Celsius target set at the COP26 climate conference in Glasgow last year.
“The impacts associated with this level of warming will be highly disruptive to supply chains and this reliance on fossil fuels makes the global economy and energy security vulnerable,” she said.
“However, these risks and the major shifts to renewable energy sources and more resilient infrastructure provide major opportunities for institutional investors to lead the way, to help mitigate climate risk whilst targeting compelling returns.”
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