Net zero rises up investors’ decision tree

4 December 2021

Environmental, social and corporate governance forms part of many investors’ everyday decisions, amid a growing global push towards net zero.

A report from global investment manager Ninety One found 57% of investors across the UK, Italy, Germany, South Africa and the US have investments with a focus on net zero or other environmental and societal benefits and the majority (67%) are invested in them for five years or more.

Most investors were found to prefer an inclusive approach to achieving net zero emissions, with 45% preferring their investments to help companies, sectors and countries transition away from a reliance on carbon compared to 36% who support divestment.

However, these numbers had changed slightly from a pre-COP26 report published in October which found 55% of investors preferred investment managers to use their influence to support a net zero transition and only 30% preferred divestment.

Meanwhile, nearly three quarters (71%) of investors also felt that richer countries should be helping poorer countries to transition to net zero, but 57% admitted that they do not believe that the outcomes produced by the recent COP26 summit would lead to global climate alignment on tackling climate change.

A large number of investors (69%) cited the absence of China and Russia as making it more difficult to achieve.

Hendrik du Toit, founder of Ninety One, said: “There is a sobering and incontrovertible fact about the drive to net zero: any effort that does not work for the world’s 7.9 billion people, most of whom live in emerging markets, will fail everywhere. To really save the planet we must help emerging markets go green. That means robust carbon markets, debt for climate deals and financing options to speed the transition.

“After all, emerging economies are not responsible for the bulk of emissions to date. Rather, OECD member countries are responsible for three-fifths of cumulative historic emissions. That’s seven times more than the rest of the world on a per capita basis.”

Ninety One said many investors also felt that reducing carbon emissions will produce compelling investments, with 40% stating that they are happy for their money to influence decarbonisation while also expecting a competitive financial return. Meanwhile, 71% of investors said they preferred active managers for investments that are focused on net zero, environmental and societal benefits. This number rose to 78% amongst those that took an active interest in COP26.

Du Toit added: “Although the private sector cannot solely provide the kind of incentives needed, we must drive the early momentum of the intended transition and provide green finance at scale.

“For governments, policy makers and capital allocators, this is the longer path to take. It is also the right path, and the investment opportunity is in the tens of trillions of dollars. With a fair and inclusive transition, the whole world wins.”

Professional Paraplanner