Interest in sustainable investing is continuing to strengthen among real asset investors, but barriers around the sector risk disrupting further progress, according to the Aviva Investors’ Real Assets Study 2024.
Appetite for sustainability among real asset investors is strengthening, across all regions, but data quality still needs to improve.
Signs over how real asset investors are engaging with sustainability are most evident around allocations to climate transition-aligned investments in real estate and infrastructure.
Encouragingly for the energy transition, appetite for renewable infrastructure – windfarms, solar panels, renewable-linked energy grids etc – shows no signs of diminishing. Nearly half of all respondents (49%) already have exposure to renewable infrastructure and are planning to raise this, with 14% more planning to invest for the first time.
Tellingly, there are signs of greater investment than divestment in these assets. Across all regions of respondents, numerous clusters of investors currently without renewable infrastructure exposure – from 13% in APAC to 14% in Europe and 17% in North America – indicated they were considering engaging with the sector. This far outweighs the overall number of respondents, 11%, planning to trim back their holdings
Doubts over success
Though more capital is being earmarked for sustainable assets, this has not necessarily translated into confidence. The study found many investors remain unsure of what they need to do to influence climate change. When asked about the actions needed to meet their long-term sustainability commitments, 53% of all respondents said they were "not confident at all" or "somewhat unsure".
Specifically, within the context of decarbonisation, appetite to engage with this theme was somewhat mixed among investors. Although 57% of respondents have made a net-zero commitment and a quarter more were exploring feasibility, 17% of respondents said they had no plans to set such targets. This reflects that more work is needed to define net-zero policies and develop processes that link ESG aspirations with real asset allocations.
To shed more light on investors' misgivings around sustainable real asset investment, insights were sought on the risks they associate with this sector. Tellingly, 47% of all respondents – regardless of region – identified the difficulty of measuring and evidencing real assets' positive impact as a material risk for the sector.
‘Greenwashing' has attracted scrutiny from regulators and continues to cause concern among investors. The Aviva Investors' study found that discomfort around greenwashing was rife, with 52% and 54% of respondents in North America and APAC respectively feeling this way. This is why the ability to evidence impact has grown in importance. Respondents also highlighted concerns around the potential for unsatisfactory performance of sustainable real assets and high valuations as material risks for this theme.
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