Global sustainable investment (SI) indices outperformed their benchmarks in the fourth quarter of 2023 with climate strategies having the strongest full-year performance according to the latest quarterly Sustainable Investment Insights report from FTSE Russell.
The report showed that last year all global SI equity indices outperformed which was in stark contrast with 2022 where all but one strategy underperformed.
Oil price and energy equities were a tailwind for SI indices but FTSE Russell said the recovery in the technology sector was the most influential factor in the outperformance.
“However, going into 2024, the sector needs to manage weaker flows into SI funds and analyse the impact of COP28,” said FTSE Russell.
The report npted that the key event for sustainable investment last year was COP28 in Dubai in November.
The global conference agreed eight recommendations including a transition away from fossil fuels, which gained the most attention as it was the first time fossil fuels have been mentioned in a COP statement.
Other significant recommendations included tripling renewable energy capacity, doubling the annual rate of energy efficiency improvements and substantially reducing global methane emissions by 2030.
“Despite the many challenges facing sustainable investors, there are grounds for
optimism,” added the report. “Recent FTSE Russell research shows that, while the
average company is seeing roughly neutral on carbon emission growth – in line to
slightly better than global carbon emissions-, the top quartile of companies are
cutting emissions in line with a net zero trajectory (~6-7%).”
FTSE Russell also highlighted that the Environmental Opportunities index,
outperformed in the fourth quarter of 2023, driven by energy efficiency companies
and that renewable and alternative energy companies saw their first quarter of
positive performance in 2023.
“However, challenges remain as both green bond issuance volume and SI fund
flows remained subdued in Q4,” added FTSE Russell.
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