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Ninety One: Investors pushing the drive to net zero

Thirty two percent of investors are happy for their money to be used to reduce carbon emissions, regardless of return

Ninety One has today published the second edition of the Planetary Pulse survey, Investing for a Carbon Free World: What Investors Want. The survey of more than 6000 individual investors (investors) across ten markets (UK, Germany, Italy, Denmark, Sweden, South Africa, Singapore, Hong Kong, US, and  Canada) found that investors are ready to support the drive to net zero, with half stating that asset managers should use their influence as shareholders of carbon-heavy companies  to help facilitate the reduction in carbon emissions. This suggests that investors are ready to use their wealth to invest in sustainable solutions which assist in the drive to reach net zero.

Based on their answers, respondents fell into four broad investor personalities when they thought about investing overall and sustainable investing specifically.

Quietly Cautious (28%) ·        Highly risk adverse

·        Less interested in interrogating ethics and practices of companies

·        Not convinced net-zero will affect climate change

·        Limited to no knowledge of net zero

Whatever Works (21%) ·        Carefree attitude, tend to go with the flow

·        Interested in following investment trends

·        Becoming more aware of net zero

The Attentives (24%) ·        Carefully planned, well researched, pay close attention to where their money ends up

·        Willing to pay more for things that are ethical and environmentally beneficial to do their part

·        Truly believe in net zero- building for a financial and planetary legacy

Confident Enthusiasts (27%) ·        Focused on building income and wealth

·        Hungry for research, data, and ideas

·       Net zero enthusiasts but without proper action by big polluting economies and sectors they will simply divest

Despite a clear knowledge gap, the concept of investing to achieve net-zero has positive appeal for 4 out of 5 investors.  However, many investors remain sceptical about their ability to contribute to efforts to tackle climate change, with 61% stating that they feel the worst polluter should be tackling the issues. 

By allowing investors to briefly reflect on the potential outcomes of engagement and divestment, it was found that their preferences shifted away from divesting by 6-percentage points, with a 5-percentage point swing towards proactively engaging with companies to reduce carbon emissions. This indicates that spending time clarifying investing for impact is vital. All the cohorts of the investors identified shifted their views on how to approach net-zero investing when given the chance to discuss the issue at stake.

It is evident that divesting from high emitters will create significant risks and inescapable consequences for emerging markets, starving them of capital. While nearly half (49%) of investors were able to see the negative impact divestment will have on the developing world, there is more conversation needed to raise awareness regarding allocation of capital to ensure an inclusive, global transition to net-zero.

Hendrik du Toit, Founder and CEO, Ninety One: “We believe in sustainability with substance. However, 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 everywhere. 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 the transition. As a company with its roots firmly in South Africa, we understand this need perhaps better than most. Emerging economies, after all, are not responsible for the bulk of emissions to date.”

Encouragingly, these findings confirm the growing global movement to create long-term, impactful changes to tackle climate change, and shift to investing for net zero, with 9 out of 10 investors stating that they believe that reducing carbon emissions should be encouraged and are happy for their money to play a part in achieving that aim.  Moreover, 32% of investors believe this so strongly that they are happy for their money to be used to reduce carbon emissions, regardless of return.

Deirdre Cooper, Co-Portfolio Manager, Global Environment Fund, Ninety One: The climate crisis presents both tremendous opportunities and risks to investors. This survey makes clear that investors across the globe are looking to allocate capital to funds which invest in companies and countries that are working towards a sustainable future. 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 and outsourcing. It is our responsibility to provide end investors with solutions which can counter the climate crisis.”

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