As COP 26 begins, almost a quarter of the largest asset managers has set net zero targets for their investments and more ambitious targets are planned, according to NN Investment Partners (NN IP) research.
Many asset managers have already started to announce net zero emission targets and this is likely to accelerate around COP 26.
Investors are also increasingly focused on evaluating their portfolios from a climate risk perspective and one result from the conference could be a permanent shift in sentiment towards greenhouse gas intensive sectors.
The Dutch based fund manager used natural language processing (NLP) to analyse over 10,000 responsible investing publications to assess changing attitudes.
I found that climate has leapt up the agenda for the world’s 500 largest asset managers with double the amount of responsible investing publications and 150,000 paragraphs that discuss environmental, social and government (ESG) topics.
“Asset managers have high expectations for the outcome of the climate change conference in Glasgow,” said Sebastiaan Reinders, Head of Investment Science at NN Investment Partners.
He adds, “The 150,000 paragraphs contain diverse but optimistic views on the expected real world outcomes from the COP26. The research shows professional investors expect coordinated, meaningful and actionable agreements on climate policy will be reached this time.”
Asset managers mentioned CO2 emissions in 33% of their ESG-related publications this year compared to 6% in 2016. They mostly focus on setting mid-term goals for the proportion of their investments to be managed in line with a net zero policy, according to the text analysis.
The research found that they often mention 2025 and 2030 as target dates. Most asset managers say they are working on more detailed net zero goals with multi
ple mentions of “roadmap” and “framework” for net zero emissions in their publications.
Combining climate goals and post-Covid recovery plans is often cited as an opportunity to “build back better”. They expect an improved framework for financial and technical assistance to help lower income countries contribute to climate goals.
Asset managers’ responsible investing publications also show a broad consensus on the growth of green securities.
NNIP’ research shows that a rising supply may drive down the price of existing similar securities, such as green bonds and impact equities. However, asset managers expect that the new crop will be absorbed by increasing overall demand as attention on climate change increases.
NN IP currently expects green bond issuance to jump 25% in 2022 to around €500 bn, and the total could be even higher depending on how fast the EU looks to issue more green bonds.
Social bonds and sustainability bonds also are forecast to see significant increases in issuance next year.
Markets Media Europe 2021
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