Chart of the Week: Climate Change Is Increasingly Driving Investment Policy

With Earth Day just a few weeks away, this week’s chart considers the impact of climate change on investment policies. ESG research provider Robeco released its 2021 Global Climate Survey this week, surveying over 300 institutional and wholesale investors in Europe, North America, and Asia Pacific. The intent is to understand how climate change is affecting all investor types, not solely the largest, with hopes of painting a picture of how climate change factors into investment decisions, today relative to both historical and future considerations.

Looking at the report, Robeco fielded responses from insurance companies, pension funds, private banks, fund-of-funds, advisory firms, wirehouse broker/dealers, sovereign wealth funds, endowments and foundations, and family offices, totalling to $23.4 trillion in Assets Under Management (AUM).

Per the chart below from their survey, it is clear that investment policies are changing significantly to include environmental risk mitigation in their portfolios. Looking at the data, we see that 86% of investors say that, in the next two years, climate change will be at the center of, or a significant factor in, their investment policy . This is up from a total of 73% that say climate change plays a role in their investment policies today, and 33% that said it did two years ago.

This chart above, coupled with market data, demonstrates that environmental finance is finally becoming mainstream. Breaking down the demand across the finance landscape:

• We saw new corporate commitments this week from BlackRock Inc. and Vanguard Group Inc. to join the Net Zero Asset Managers initiative, along with 42 other firms representing $22.8 trillion s that are pledging to support efforts to limit global warming by 1.5 degrees Celsius by 2050, targeting net-zero emissions across all their holdings.
• In 2020, VC investment into climate tech was the highest year on record with $17 billion invested globally with over 1,000 deals.
• SPACs – including Fisker, Lordstown Motors, QuantumScape, Hyliion, XL Fleet, and others – capitalized clean tech companies in 2020 with almost $4 billion of capital.
• Green bond issuance hit $790 billion in 2020, up from $577 billion in 2018.
• Asset flows into ESG funds in the U.S. more than doubled compared to 2019, totaling $51 billion.

It is clear from the data that demand is driving new forms of financing with climate change at the center, and from the chart above, it is clear investors are taking notice too.

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