A survey by asset manager Ninety One, which covered more than 6,000 investors in 10 countries, shows the overwhelming majority support their savings being used to promote transition to net zero carbon emissions by 2050.
The group listed in London and Johannesburg, known formerly as Investec Asset Management, released its second Planetary Pulse survey on Tuesday giving insight into the climate-related sentiments of investors from the UK, US, Canada, Italy, SA, Hong Kong, Germany, Denmark, Sweden and Singapore.
The survey showed that 52% of investors support asset managers using their influence as shareholders to push companies to reduce their carbon exposure. A further 32% want asset managers to divest entirely from high carbon emitting companies regardless of the effect on returns.
The report comes less than three weeks before the UN’s 26th Climate Change Conference, commonly known as Cop26, which will be held in the Scottish city of Glasgow from October 31 to November 12. It also highlights the rising pressure that asset managers and banks are increasingly facing from the growing public consciousness on issues such as climate change and sustainability.
“There is an incontrovertible and sobering fact about the drive to net zero, any effort that does not work for the world’s 7.9-billion people will fail,” Ninety One CEO Hendrik du Toit said in the report. “To really save the planet, we must help emerging markets go green. That means robust carbon markets, debt-for-climate deals and financing options to speed up the transition. As a company with its roots firmly in SA, we understand this need perhaps better than most. Emerging economies, after all, are not responsible for the bulk of emissions to date.”
Like most SA companies, Ninety One is a strong advocate for a “just transition”, the notion that developing economies should be granted more time to transition towards achieving net zero carbon emissions by 2050 as they are largely not responsible for climate change.
Nevertheless, emerging markets are not entirely blameless with economies such as China and India also regarded as heavy emitters. Even SA’s Eskom was named earlier this month by the Centre for Research on Energy and Clean Air as being among the world’s biggest emitters of sulphur dioxide.
That is partly why some shareholder activist groups like Just Share want SA asset managers to take a stronger stance in support of decarbonisation, arguing that a more rapid transition to a sustainable future does not necessarily mean economic growth will have to be sacrificed. Still, a report released in August by the National Business Initiative, Business Unity SA and Boston Consulting Group found that while SA would be able to fully decarbonise its energy system by 2050 it would require at least R3-trillion in investment over the next three decades.
“The investment management industry has an integral role to play in tackling the climate crisis in the real economy, and this cannot be met by providing investment capabilities to investors which tilt towards asset-light sectors, moving capital out of emerging regions, or selling assets to less responsible owners,” Deirdre Cooper, Ninety One’s co-portfolio manager of its global environment fund, said in the report. “It is our responsibility to provide end investors with solutions which can counter the climate crisis.”
Yet Ninety One’s Planetary Pulse report acknowledges that investors may already be “ahead of the industry in some ways” with many wanting full divestment from carbon intensive companies and sectors. That is evidenced by one in three investors surveyed saying they intend to increase their wealth allocation to companies or funds aimed at promoting the net zero transition by more than 10% over the next 12 months.
However, the survey also highlights the difficult balancing act that asset managers will need to play to placate investors demanding a more aggressive path towards decarbonisation while also pleasing those who still demand decent returns.
While Ninety One’s report showed almost a third of investors wanted their asset managers to support decarbonisation regardless of the effect on returns, a greater proportion felt otherwise. No less than 45% of investors said that while they are happy for their money to be used to reduce carbon emissions they still expect competitive financial returns.
“The climate crisis presents both tremendous opportunities and risks to investors,” said Cooper.
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