Asset owners may encourage investment in climate change mitigation, research suggests

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Asset owners, who control substantial capital in the financial system through pension funds, endowments, foundations, and private holdings, can help drive investments in climate change mitigation, according to a new study from the Yale School of the Environment. It may play an important role.
The study, led by researcher Emil Moldovan, asked owners of large asset portfolios to consider the environmental impact of their investment decisions and align their portfolio goals with global efforts to limit climate change. It turns out that they are aware of the need to do so. However, challenges include perceived risks, lack of training in the climate investment sector, and alignment of investments and portfolio objectives.
“There are a lot of bottlenecks to climate action right now. I don’t want to say that any bottleneck is a bigger problem than the other, but what I’m looking at is money and money. What are the underlying structures that determine what happens with climate investments?” said Moldova, who previously worked as a senior specialist at Deloitte Consulting. spoke.
According to the International Monetary Fund, achieving net zero goals by 2050 will require low-carbon investments to increase to more than $5 trillion a year by 2030.
Moldova and his team conducted more than 60 interviews with asset owners and managers of more than $750 billion in assets and their stakeholders for the study, published in npj Climate Action.
The team investigated what influenced climate investment decisions, including legal frameworks, fiduciary duties, and climate expertise. We also looked at influences from asset owners, legal beneficiaries such as employees and pensioners, and stakeholders such as environmental and advocacy groups. Asset owners and portfolios included individual investors, high-net-worth family offices, foundations, corporations, pensions, endowments, and trusts.
The team used a structured framework (four stages of organizational change) to explore how asset owners perceive and respond to the challenges of climate change. The stages include awareness, evaluation, implementation, and feedback.


Schematic diagram of the flow of capital in the financial system. Credit: npj Climate Action (2024). DOI: 10.1038/s44168-024-00168-4
“This study is unique in that it tests whether asset owners are nuanced individuals who are interested in and influenced by the various factors that determine their position on climate-smart investments.” said study co-author and YSE Sustainability Instructor Todd Cote. .
The researchers found that investors respond to both hard and soft power to control their portfolios, including legal obligations that give them room to invest in climate change solutions and stakeholder demands to expand these investments. I discovered that
“Often there is an assumption that fiduciary duty is about maximizing profits at the expense of environmental impact, but the paper exposes this as false. It’s so subtle that it doesn’t exist,” Cote said.
“In fact, we should treat return maximization as one of our fiduciary considerations consistent with other objectives. The actual obligation will always be a combination of priorities from asset owners. Furthermore, the document makes clear that this flexibility is important for asset owners.” Fiduciary duties enable climate change investing in a variety of contexts. ”
One of the study’s key findings is that while investors are starting small with lower-risk allocations and carve-outs, asset owners are increasingly aligning financial returns with environmental goals. It’s about being there.
To accelerate investment, the authors proposed several key interventions. Extending investment horizons to support sustainable choices. and engage beneficiaries and stakeholders on what actions can be taken to influence asset owners.
“We have drawn a map of how people concerned about climate change can interact with property owners.Different people can see themselves in that map and create their own positions. You will be able to take this into account and understand your possible actions,” Moldova said.
The study was co-authored by YSE senior researcher Jennifer Marlon. Anthony Leizerowitz, Joshuani Tomkat Professor of Climate Communication; and Matthew Goldberg, research scientist at Yale University’s Climate Change Communication Program.
Further information: Emil Moldovan et al., Asset Owners’ Evolving Climate Change Investment Strategies, npj Climate Action (2024). DOI: 10.1038/s44168-024-00168-4
Provided by Yale University
Citation: Asset owners may boost investment in climate change mitigation, study suggests (November 6, 2024) https://phys.org/news/2024-11-asset-owners-investment Retrieved November 6, 2024 from -climate-mitigation.html
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