Aviva Investors, the global asset management business of Aviva plc, announced today the release of its annual survey of institutional investors in the real asset sector, indicating a growing appetite for investment in the sector as the investors ramp their net zero commitments.
For the Aviva Investors Real Assets Study, Aviva surveyed over 1,100 investment decision makers in insurance and pension funds across 56 countries globally, collectively representing more than over €2 trillion of assets under management.
One of the key findings of the survey was a sharp ramp in investors setting net zero investment pledges. The study indicated that more than half of pension funds and insurance companies now have plans to achieve net zero in their portfolios by 2050, up from only 39% last year. Net zero pledges were similar by insurance and pension categories, at 52% and 50%, respectively, but varied by region, with 60% of North American pension funds with net zero portfolio commitments in place, compared to 47% in Europe and only 41% in Asia.
According to Aviva, two thirds of pension funds now have come form of net zero commitment in place, up sharply from 47% last year.
As governments around the world look to attract private capital to their post-COVID ‘build-back-better’ initiatives, with improvement in the policy environment encouraging investment in areas such as clean energy, sustainable infrastructure and climate resiliency, investor appetite for real assets is growing. Approximately 45% of respondents indicated that they plan to increase allocations in real assets over the next year.
Examining investor attitudes on environmental factors as a very encouraging factor to real asset investment by environmental credentials environmental credentials, the study found that 90% said that transparent reporting and target setting would be encouraging, similar to levels cited for factors including green financing and carbon offsetting.
The study also found differences between insurance companies and pension funds, regarding the climate-focused key performance indicators (KPIs) that they focus on. The most often cited “most important real asset climate-focused KPI for insurance companies was climate physical risk, at 36%, while climate transition risk topped the list for pension funds at 37%.
Commenting on the study’s findings, Daniel McHugh, Chief Investment Officer, Real Assets, at Aviva Investors, said:
“Our latest Study reveals the pace at which Real Assets is evolving as an asset class on climate and ESG issues, and how critical those considerations are seen to investment decision-making. This includes a fundamental shift towards measuring and quantifying those factors, rather than paying lip service to them through pledges and policy alignment. Partly that is as a result of better understanding of the elements involved but also as end-savers scrutinise more for potential greenwashing practices. Encouragingly, Real Assets are often favoured by investors for integrating these themes into portfolios, as their positive impact is typically clearer to isolate and quantify.”