Already 20% of the most sophisticated investors have set formal targets and momentum is clearly building for those yet to do so. Over 70% of European and APAC investors, and 61% of North American investors intend to set decarbonization targets within the next three years.
Source: State Street Global Advisors. Q What are the main drivers for your institution to factor climate issues into investment decisions and/or work towards portfolio?
Newly prominent – ahead of investment opportunity and risk management – investors told us that a desire to drive real change was a key factor in their decision-making.
Source: State Street Global Advisors. Q: What is your preferred approach to addressing the eﬀects of climate-focused investing on tracking error versus your benchmarks in your index- based equity and fixed income portfolios?
Portfolio decarbonization highlights the need for bold action to either broaden tracking error allowances or move to more appropriate carbon or climate-focused benchmarks.
Source: State Street Global Advisors. Q: How important will each of the following strategies be in your institution’s efforts to address climate issues and/or decarbonize its equity and fixed income portfolios over the next three years?
Investors view engagement and more robust criteria for asset managers as the most important strategy to address climate issues over the next three years.
The Climate Stewardship Review provides context around State Street’s climate stewardship approach, sharing insights into our climate-focused engagements and identifying emerging climate-related trends.
In the past, environmental, social and governance (ESG) considerations were often used as overlays in existing portfolios, i.e., as screening tools rather than as an integrated component of the investment process. The last decade has seen a shift by asset managers toward incorporating ESG concepts into their investment philosophies, with the aim of enhancing alpha generation and risk mitigation.