Institutional investors plan £1trn divestment from fossil fuels over next decade

Hope William-Smith
clock
Global institutional investors plan to divest 15.6% of their portfolios from fossil fuels over the next ten years
Image:

Global institutional investors plan to divest 15.6% of their portfolios from fossil fuels over the next ten years

Global institutional investors plan to divest 15.6% of their portfolios from fossil fuels over the next ten years, almost tripling outflows of 5.7% planned for next year, as high-profile activism on climate change gathers pace.

The energy investment firm's survey polled 100 major global institutional investors representing $5.9trn (£4.7trn) in assets under management and include pension funds, insurers and sovereign wealth funds.

It found that respondents planned on divesting $920bn from fossil fuels over the coming ten years, while also ploughing $643bn into renewable energy assets. The UK investors surveyed said they would divest $360bn from fossil fuels over the next decade, while investing $194bn into renewable energy.

Octopus Renewables co-head Alex Brierley said: "Our research shows an increased demand from global respondents for greater access to renewable energy and we are seeing a growing awareness  that the asset class can both generate long-term stable returns from investors and have a positive impact on climate change."

Octopus found UK-based financial institutions are particularly optimistic about their ability to help slow global warming. A total 71% of surveyed institutions said investment strategies could be used to make a material difference to climate change outcomes.

In the UK, the government's moved to establish a new zero target by 2050 has followed high-profile climate campaigning activity. Octopus found a total 44% of institutions nationally have made changes to investment portfolios in favour of climate action activism over the past year.

Brierley added: "Transitioning to a renewable energy future is challenging, but vital, and we still need to make bolder commitments on this front and institutional investors can play a critical role in reaching this global goal by galvanising capital toward renewable energy infrastructure."

The survey identified a number of barriers to greater investment in renewable infrastructure however, including lack of renewable energy investment skills and uncertainty around energy prices.

Octopus Renewables co-head Matt Setchell said: "We can't rely on divestment from fossil fuels as the only answer [and] it's disappointing that the proportion of capital divested from these assets isn't higher.

"If we are to unblock investment into these areas, institutional investors will need to become comfortable with different types of investment risks."

 

More on Risk Reduction

BW said a 'healthy level of activity' is likely to continue into 2022

Heightened appetite expected for 2022 bulk annuity market

Research found 2021 bulk annuity market volumes are recovering after a slow start

Holly Roach
clock 02 December 2021 • 3 min read
Aon Global Pension Risk Survey: DB schemes speed to buyout

Aon Global Pension Risk Survey: DB schemes speed to buyout

Matthew Arends discusses the UK results of Aon’s latest pension risk survey

Matthew Arends
clock 22 November 2021 • 4 min read
This episode of DeskFlix Espresso focusses on life after settlement

DeskFlix Espresso: Life after Settlement

This virtual event looks at issues trustees need to consider after conducting an insurance deal

Jonathan Stapleton
clock 19 November 2021 • 1 min read
Trustpilot