Decarbonisation is a trend expected to continue among investors during the coming years. One out of 10 fund selectors in Europe is already completely avoiding so-called “carbon emitters” or traditional carbon-emitting energy companies. Twice as many plan to do so in the next two to three years.
This according to research by PGIM, which surveyed 210 gatekeepers responsible for selecting investment funds in Europe and Asia late last year. The invested assets of the firms the gatekeepers work for are at least one billion dollars.
In a parallel trend, 31 per cent of gatekeepers plan to withdraw “gradually and prudently” from traditional energy companies in the coming years, compared to 16 per cent who are already doing so. Some eight per cent of fund selectors still allow traditional energy companies, regardless of their carbon emissions. Six per cent of gatekeepers will continue to do so in the coming years.
Commenting on the survey, Yvo van der Pol, head of benelux & nordics at PGIM Investments, said that after a very strong focus on exclusion, investors in the Benelux and beyond are now increasingly embracing the idea that the energy transition warrants a more balanced approach.
“Companies with current high emissions but with a clear and convincing path towards reducing their emissions are an important addition to an ESG-oriented portfolio,” he said.
More in equities than bonds
Two-thirds of gatekeepers invest in ESG equity funds, with the remaining respondents planning to do so in the future. When it comes to bonds, 54 per cent of gatekeepers invest in ESG funds. The rest have plans to do so.
If asset managers want to elicit greater allocation to ESG equity funds, gatekeepers say they will have to pay even more attention to transparent and more detailed reporting. Clearer terminology and standards can also help, they respond.
Finally, the survey found that 80 per cent of fund selectors use global ESG indices to evaluate the relative performance of ESG equity funds. Only 19 per cent use a traditional non-ESG benchmark.
This article originally appeared in Dutch on InvestmentOfficer.nl.