The World Targets Change How Investors’ Global Focus on Carbon is Set to Alter the Game
Report at a Glance
Global Head of ESG and Sustainable Investing Karen Wong shares the three key takeaways from the survey.
Video (00:45)
Desire to drive real change and the potential for investment outperformance is accelerating carbon target-setting across the globe.
of investors will implement decarbonization targets within 3 years.
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?
A Major Change in Sentiment
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.
Successful implementation may mean taking bold leaps to overcome barriers such as benchmark and data issues.
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?
A Move from Standard Index Benchmarks
Portfolio decarbonization highlights the need for bold action to either broaden tracking error allowances or move to more appropriate carbon or climate-focused benchmarks.
Engagement, asset stewardship and robust climate criteria & credentials are key strategies leading the way to success.
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?
The Importance of Engagement
Investors view engagement and more robust criteria for asset managers as the most important strategy to address climate issues over the next three years.
We are at a tipping point. In this article, we identify seven feedback loops that are driving a rapid transformation of the global energy system.
In our recent survey of over 350 institutional investors, responses confirmed that there are some substantial shifts underway in fixed income investing. ESG in fixed income is becoming a high priority for investors globally and this short paper focuses on those findings.
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.
Learn more about ESG at State Street Global Advisors.