2022 Global Climate Survey Report by Robeco

Findings from the 2022 Global Climate Survey Report by Robeco, our partner in sustainability

Executive summary:

Climate change remains central to investor strategies over the coming years, as active ownership and biodiversity increase in importance. This is the main takeaway from the 2022 Robeco Global Climate Survey, which gathered the views of 300 global investors on their approaches to decarbonization, climate change, biodiversity and engagement. It is the second global survey of its kind and follows the success of Robeco’s 2021 report.

A few highlights from the survey report:

• 84% of investors say climate change will be central to or a significant factor in their investment policy over the next two years, while 75% say this is already the case.
• 56% say biodiversity will be central to or a significant factor in their investment policy over the next two years.
• 80% say engagement will be central to or a significant factor in their investment policy over the next two years.
• 22% of investors say they will completely divest from oil and gas companies in the next two years.

As the global climate crisis becomes more urgent, it is clear that investors around the world are moving decarbonization, biodiversity and active ownership to a more significant, if not central, position in their investment portfolios.

Biodiversity

This year’s survey finds that, besides reducing the carbon intensity of their investments, investors also realize that maintaining biodiversity is also a necessity to preserve life and well-being on earth. In both cases, being an active owner and engaging with investee companies is vital for investors to have a positive real-world impact.

On biodiversity, we can see that investors currently face a challenge of implementation. This is because the financial implications of biodiversity loss are rarely measured, making it difficult for investors to take action. The use of thematic investing and impact investing is one way to address this. Another one is to make use of the UN Sustainable Development Goals that relate to biodiversity, which is happening according to our findings.

Thematic investing

One of this year’s key findings is the rise in the importance to investors of thematic investing, climate change strategies, as well as impact investing. This shows that investors are no longer content to simply integrate ESG criteria into an investment approach, in order to avoid the worst effects and risks of poor ESG practices.

Investors want to see that their investments make a positive difference and help support the transition to a more sustainable economic model. Thematic investing in, say, renewable energy, can help investors have a positive impact, while also meeting their risk and return expectations. Taking more account of the real-world impact of investment strategies can therefore be seen as a natural accompaniment to other steps taken by investors to tackle climate change, such as making a formal commitment to net zero carbon emissions by 2050.

Active ownership and engagement

Another important step, as highlighted by the report, is the use of active ownership and engagement by investors. Institutional investors have an influential role as equity owners or debt holders in many companies. If engagement is to be truly effective, it needs to be ‘engagement with teeth’ as it has been described. This means being ready to divest if there is insufficient progress with investee companies. Here, we can see increased willingness amongst investors to divest, which should help make engagement more effective.

We trust that this survey sheds light on how institutional investors view some of the key issues around decarbonization, biodiversity and active ownership and engagement. Progress is being made, but much still needs to be done. We hope that this year’s survey helps both asset owners and asset managers by showing how the investment industry is starting to play its role in tackling climate change.

Divestment and how investors are moving ahead on climate change and biodiversity

For oil and gas, the divestment appetite has doubled and there is an increase in active ownership.

This begs the question: how much of this is a function of responsible investment and how much is it a response to risk-return considerations?

This is a particularly interesting question, because energy stocks were the best performing stocks last year. That suggests that it could be more related to responsible investment rather than risk-return consideration.

This is a key highlight of the survey because this investor sentiment goes against recent market returns. Clearly, biodiversity is top of mind for a lot of investors and almost on par with climate change in terms of its urgency and awareness. Why is it now so important? We think it is because of the climate change discussion; we are now so aware of the physical impacts of climate change – we feel nature speaks to us. Previously, climate change was a discussion about carbon emissions and mitigation. That has really changed in the last year, we are now acutely aware of how nature can strike back. Investors are aware of the risks to biodiversity, and they understand it has economic implications.

Much of the world’s economy is critically dependent on healthy ecosystems and people understand that. But to translate it into financial risk and discounted cash flows at issuer level, that is where the challenges sit. That’s the real challenge with biodiversity. With climate change, it’s a bit easier because you have the carbon footprint. We all know the limitations of carbon footprints but at least it allows you to link a company to climate change.

Click here to read the full Global Climate Survey.

Please note: Robeco’s Global Climate Survey does not take South African-specific trends or data into account.