ESG

To get the most benefit from the transition to net zero it’s worth asset owners considering the natural advantages they have and the areas where they’re best placed to provide capital.

The $10 billion ethical investor is “actively exploring” opportunities in growing sectors like water, wants to invest more in private debt and expects new issuance of government green bonds as the asset class sees a resurgence of interest.

Forestry comes with high returns and low volatility, and also rises to the top of the real assets universe in terms of inflation protection and diversification. It doesn’t fret recessions much, either.

Biodiversity is under rising threat around the world, with potentially disastrous economic and social consequences, while water-related risks are likely to strain insurers and government budgets.

Last year’s savage selloff hit ESG strategies hardest, but it hasn’t hit the appetite from big institutions. Their tastes have just become more discerning, with more stringent criteria for external manager selection.

The use of climate-related investment practices is seeing a sharp fall among the global institutional investor set, while more than half of them are worried about achieving the best returns while delivering emissions reductions targets.

Environmental, social and governance (ESG) funds should forget fiduciary duty, dump ratings and adopt extreme exclusions in a radical revamp of the investment overlay proposed in a US academic paper.

From little things big things grow, and the $75 billion industry fund hopes the impact investment commitments it and other funds have made will expand beyond their initial targets in the same way renewables did.

The growing scale of the carbon credit market – and the fact that the next stage of emissions abatement isn’t going to be as simple as the last – means that more institutional attention is warranted, according to Apostle. Just watch out for the volatility.

Global biodiversity loss represents a systemic risk for financial markets, and Australia – and its super funds – should be “global champions” for biodiversity efforts, according to Federated Hermes.

Institutional investment in natural capital assets continues to grow, buoyed by supportive regulation and corporate interest in the market, but good global data is still hard to come by.

The bias towards investing in domestic securities and the complexity of the local benchmarks mean the impact investing conversation is “very advanced” Down Under, according to global asset manager Ninety One.