30 November 2021
In their annual Real Assets Study Aviva Investors asks how are global investors responding to an evolving landscape?
Global institutional investors have dramatically raised their ambition to achieve net zero in their real asset portfolios over the last 12 months. Our poll of more than 1,100 global institutional investors shows that 52 per cent of pension funds and insurance companies are now planning to achieve net zero in their portfolios by 2050 – up 12 percentage points on last year's study.
These investors represent a total sum of over €2 trillion of assets under management and span 56 countries across Europe, North America and Asia, so they have a major influence.
At the same time, they are increasingly aware of the stark challenges they will face in becoming net zero across infrastructure, real estate and private debt investments. Environmental pressures are described as 'discouraging' by more than 80 per cent of the institutions polled, which will give governments around the world pause for thought as they pursue the twin goals of net zero and 'building back better'.
On the one hand, investment in infrastructure is seen as key in driving job creation, but at the same time investment in new infrastructure is seen as the asset class likely to pose the biggest obstacle to institutions achieving net zero.
Even with retro-fit increasingly in vogue, investors see sustainability challenges in real estate, with the higher costs of improving properties' environmental credentials currently adding to steep materials and labour costs on new developments.
The good news is that in the space of a year, global institutional investors have rapidly raised their game in the way they tackle sustainability issues. Warnings that there is no time to waste in minimising the effects of the climate emergency have concentrated minds beyond alignment to global agreements and more direct action.
Clever financing solutions have jumped to the fore ahead of measures like carbon offsetting as investors begin to deliver real world answers to major challenges.
For this year's study, we also spoke to infrastructure experts at London CIV, Deloitte, CBRE and onshore wind, solar and energy storage pioneers Aer Soleir, and Aviva Investors own real assets team.
So, just how have real assets fared during the past year in the face of the twin threats of COVID-19, and the knock-on impact on economic activity, and the climate emergency?