Schroders Reports Increased Interest in Sustainable Investment Through Private Assets – GWC Mag

Investors throughout the United States are increasingly looking to private asset opportunities to make sustainable investments, according to the Institutional Investor Study from Schroders.

In an analysis of over 200 North American institutional investors, nearly a third of U.S. investors reported plans to increase private assets, seeing them as an opportunity to incorporate sustainability and impact investing into their portfolio. And 49%of investors reportedly want to allocate to the technological revolution while 39% want to allocate to the energy transition.

Because of an increased focus on a thematic approach to sustainability investing, investors are reportedly prioritizing companies aligned with the energy transition. This data, according to Schroders, marks a shift away from considering ESG simply as a risk mitigation tool, revealing macroeconomic trends towards sustainability.

“As the world grapples with regime shift and the trends of deglobalization, decarbonization, and demographics on the investment landscape, sustainability themes are becoming increasingly important, creating new opportunities for companies and investments that provide sustainable products and services,” said Marina Severinovsky, head of sustainability for Schroders North America. “As a result, investors are looking to identify and allocate capital to these emerging sustainable investment themes.”

While ESG as a portfolio objective has shifted, investors cited continued value of ESG. A majority of U.S. investors claimed that investing in sustainability and impact strategies is required for long-term financial returns. 66% stated motivation to diversify into new sectors as well, such as nature-based solutions, green hydrogen, and a just energy transition.

Geopolitical Uncertainty, Inflation Concerns Remain

Of the concerns investors reported would impact their portfolios over the next year, geopolitical uncertainty (54%), tapering of monetary policy (45%), and rising inflation (44%) were the most cited. Further, U.S. investors reported varying levels of confidence over achieving return expectations in the next two years, with 45% reportedly feeling very confident and 54% feeling somewhat confident.

Another recent report from PwC found similar concerns in the realm of climate technology investing. The report found climate tech investments to be down 40% due to economic uncertainty and the current geopolitical climate. Nonetheless, investors are putting more money towards start-ups working on technologies with higher emissions reduction potential, according to PwC.

“We’re in a whole new age of investing as real rates and inflation pressures remain higher for longer,” said Adam Farstrup, Head of Multi-Asset, Americas. “Further, decarbonization, deglobalization, and demographics — the factors that makeup what we call ‘The 3D Reset’ — will continue to have massive long-term implications for the global economy and sustain these trends. Investors will need to understand the impact of these forces and adapt their investment strategy in order to capitalize on opportunities and avoid risks associated with this rapidly changing landscape.”