Institutional Asset Manager Newsletter 23.02.24

Lack of data holds up responsible investment

Rarely a week goes by without a story on how important responsible investment is to institutional investors, yet a new report from Cerulli seems to suggest managing climate change may be less of a priority than we thought.
A survey of institutional investors, asset managers and asset owners in the US reveals just 14 per cent have made a formal net-zero commitment.
Given that it is nearly 10 years since the Paris-Agreement on climate change set out the importance of reducing carbon emission to zero by 2050, this indicates a disappointingly slow pace of progress.
However, the same report from Cerulli reveals that 25 per cent institutional investors in the US plan to make a commitment in the next 12 months, while others are "making broad commitments to net-zero goals" and nearly one-third are investing in strategies that support transition to a carbon-neutral economy.
The sticking point for investors in moving to Paris-aligned portfolios is – as ever- the lack of standardised data and analytics to inform their responsible investment strategies.
The report notes that more tools are becoming available to help investors, and Cerulli predicts greater industry collaboration to enhance consistency and provide managers, investors and other industry professionals with the data they need.
We can only hope these advances arrive quickly if there is any chance of meeting the 2050 net zero deadline.
Elsewhere we report that Europe’s IPO market is looking significantly less exciting than its US counterpart when it comes to attracting innovative companies.
Giuseppe Corsini, Partner of Capital Markets and Accounting Advisory Services in PwC Luxembourg, tells us that European IPOs garnered only USD9.2 billion, contrasting starkly with the USD20.3 billion raised in the US. This represents a 35 per cent decline for Europe compared to 2022, while the US witnessed a 157 per cent increase.
A "labyrinth of bureaucracy and red tape" is the main reason that start-ups and established European companies including Birkenstock and Oatly are choosing to list across the pond.
This is bad news for European economies that are missing out on necessary innovation to keep them competitive, and for domestic-focused investors with an eye on homegrown returns.
Corsini calls for new institutional frameworks and a capital markets union to help facilitate investment flow to talented entrepreneurs within Europe, adding that safeguards against anti-competitive practices are "essential to protect startups from being absorbed prematurely by larger incumbents".
He warns: "Europe’s innovation and startup ecosystem lacks the momentum necessary for sustaining competitiveness in the medium to long term. Urgent action from investors and policymakers is needed to redirect the trajectory before Europe’s position becomes irrecoverable in the global landscape."

Gill Wadsworth, Editor
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