Law firm Linklaters announced results of a survey of 300 infrastructure investment fund managers across Europe, with over £1 trillion of assets under management, exploring the role of environmental, social and governance (ESG) issues in their decision-making. The survey revealed broad-based intentions to increase focus on green assets, but uncertainty regarding upcoming EU disclosure requirements.
The research was commissioned by Linklaters and carried out by Censuswide, covering investment firms in UK, France, Germany, Italy, Spain, Belgium, the Netherlands and Luxembourg.
Vanessa Havard-Williams, Global Head of Environment at Linklaters, commented:
“The appetite for green is clearly growing and fast. But there is plenty of room for growth in this space, especially if we are to meet the ambitious global climate goals that have been set for the coming decades.
“Funds are recognising the role they can play in the green recovery from the Covid-19 crisis and will be spurred on by upcoming EU regulations that embed ESG into investment decision-making.”
According to Linklaters, the findings demonstrate the significant role the infrastructure investment community is set to play in the ‘green recovery’ from the Covid-19 crisis. A broad majority of respondents reported that they expect to grow the proportion of green assets in their portfolios, with 63% targeting growth in green assets levels of 10-20%, and 23% targeting 21-30% growth.
The survey also found that many fund managers remain unaware of the upcoming EU disclosure requirements, despite the fact that they come into effect in March 2021. The EU regulation on Sustainability-Related Disclosures aims to enhance transparency regarding integration of ESG factors into investment decisions and recommendations, with regulations that apply both to managers with and without specific ESG mandates. The Linklaters survey found that only 53% of respondents were aware of the new requirements, with 34% saying they were unaware, and a further 13% “not sure.”
“The EU disclosure requirements are due to come into force in just over seven months. For those funds who are yet to be across the detail, the clock is ticking, and they will need to move quickly to ensure compliance.”
The survey revealed other significant findings, including:
- Digital infrastructure is the sector which fund managers see the most opportunities as a result of the Covid-19 pandemic, with just under 4 in 10 (37%) citing interest, followed by renewable power (32%) and green infrastructure (24%) as popular sectors for potential investment.
- When asked about their most likely future assets in the green space, green and climate-resilient real estate came top with over a third (36%) of fund managers planning such investments. Electric vehicles and its accompanying networks (35%) were the second most popular.
- ESG credentials and transparency rank joint-second place (both 32%), after growth potential (36%), in the top three factors fund managers are mostly likely to consider when managing their portfolio, highlighting the important role funds are giving to sustainability in their investments.
- The US is the most attractive destination for infrastructure investment funds, with over 4 in 10 (42%) of those polled including it in the top three geographies they are likely to invest in over the next two years. The UK follows closely behind, (31%) as does Asia (24%). Around a fifth of respondents see opportunities in Eastern Europe (21%), Western Europe (21%) and Southern Europe (19%).