The election of Donald Trump may have been accompanied by significant media and political narrative around climate initiatives, but many institutional investors continue to assess the extent to which their portfolios are exposed to climate risk, or conversely, whether alpha opportunities exist in investing in companies providing solutions to climate risk.
Box 1 : Pension Funds push forward on climate goals despite backlash
At a time of resistance to environmental, social and governance goals, pension funds have become a bulwark against efforts to sideline climate risks.
In the past few months, some of the largest banks and asset managers in the United States have quit net zero networks, the climate groups that encourage their members to set ambitious carbon reduction targets and collaborate internationally on sustainability efforts.
At a time of growing backlash to environmental, social and governance goals and investment strategies, pension funds, particularly in blue states and Europe, have emerged as a bulwark against efforts to sideline climate- related risks.
The funds, which sit at the top of the investment chain, have stepped up engagement with asset managers and companies on climate goals and have kept public commitments to use their fiscal might to reduce carbon emissions. In some cases, that has meant shifting to European asset managers, which have not backed off on climate commitments as much as their American counterparts have.
Concurrent with this has been a surge in demand for climate-related private market investments. The lure of the ‘illiquidity premium’ and a correlation differential to traditional asset classes is driving this and some of our peers (asset managers) continue to pivot their business models to private investments (credit, equity, infrastructure, etc.).
You can now read the full whitepaper at the link below
