Peer-Reviewed Article · Nov 14, 2024
The evolving climate change investing strategies of asset owners
By Emil Moldovan, Todd Cort, Matthew Goldberg, Jennifer Marlon and Anthony Leiserowitz
We are pleased to announce the publication of a new peer-reviewed article in the Nature journal npj Climate Action: “The evolving climate change investing strategies of asset owners.”
Investors can play a critical role in climate change mitigation. To understand how, we interviewed a variety of investors, who had a range of interests, from maximizing profits, to reducing carbon emissions. In particular, our research identified the importance of asset owners in climate-aligned investing. Asset owners are the legal owners of invested capital. There are many kinds of asset owners, from endowments and foundations, to ultra-high-net-worth family offices and retirement funds. Asset owners set in motion the instructions that influence how the rest of the financial system works. We find that asset owners often:
- Respond to their legal stakeholders, such as the beneficiaries of retirement plans or personal trusts, many of whom are not professional investors.
- Are guided by complex investment guidelines that set constraints for how climate change may be addressed.
- Rely on external asset managers to implement their investment decisions.
- Start small and learn about climate investing iteratively.
We also interviewed lawyers, consultants, and NGOs who work with asset owners. These interviewees indicated that different stakeholders can help asset owners invest sustainably. For example:
- People who are the legal beneficiaries of funds that asset owners operate, for example, people who are saving money through an employer, can organize to ask that climate change be taken seriously as a financial risk in their portfolios.
- Lawyers can revise investment policy statements so a fund can meet its fiduciary duty and invest in climate change when appropriate.
- Consultants need to provide detailed recommendations that connect high-level investment themes, such as “invest in solar,” with specific financial tactics, such as allocating some percentage of a portfolio to a specific investment opportunity.
Finally, we find that even though asset owners are a cornerstone of the financial system, many stakeholders who are concerned about climate change have yet to fully engage them. This study provides a framework that can help people engage asset owners in climate-aligned investing.
You can read the full article, which contains many other findings, here.