Climate and broader sustainable investment priorities remain very important to the world’s largest institutional investors, but how they are being discussed is being reshaped by political and regulatory pressures and geopolitical conflict, according to Morningstar.
In the qualitative phase of Morningstar’s fifth annual Asset Owner Perspectives Survey, asset owners expressed a continued commitment to sustainable investing combined with a caution around how to communicate their sustainability objectives in the current environment. They also continue to push for more consistent and stronger data around environmental factors, particularly related to nature and biodiversity, to support their global portfolio allocation decisions.
“Yeah, I think it's temporary and more on paper than in reality. I think what we see is that many US companies and banks and asset managers don't publish climate targets anymore. That doesn’t necessarily mean that they have retreated from doing anything about it.”
Pension Fund (The Netherlands)
“One of the big challenges with ESG has been, it's been very hard to get metrics and data. All the providers have their own methodologies, their own metrics, so it's been very hard to define what success looks like. Success against what? I think what we would like to see is providers coming together and developing an industry-wide standard of measurement.”
Superannuation Fund (Australia)
“Climate is obviously the one that gets the most attention, and it's probably right that that's the case. But we also need to know the impact on other key planetary systems—How is it affecting the oceans? How is it affecting soil erosion? How is it affecting the ability of the Earth to support the human race? And we have a very surface-level understanding of that today. So it's a massive area to develop over the decades to come.”
Corporate Pension Plan (US)
Margaret Stafford – Director of Product Management, Morningstar Indexes:
“In our annual asset owner survey this year, it was particularly interesting to see how embedded sustainability considerations have become in portfolio decisions for these very influential investors. Our conversations with asset owners across North America, Europe, and Asia showed that, rather than receding into the background, sustainability has become foundational to investment process and risk considerations and is also playing out in asset owner thinking around other emerging asset classes and initiatives like private markets and artificial intelligence. We’re looking forward to taking a deeper dive into this theme in our upcoming quantitative survey.”
Morningstar will test these learnings in the upcoming quantitative phase of its annual global institutional market survey, to be fielded in July and August with the findings to be shared in September.
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