Investment managers are increasingly failing to aim for net zero across their portfolios as the majority predict that the net-zero transition will fail, LCP has found in its recent survey.
The early preview of LCP’s Responsible Investment manager survey said out of the 119 investment managers – including portfolio managers, fund managers and asset managers – it engaged with, 57% believe the transition to net zero is likely to “be disorderly or fail”. This comes as the percentage of managers aiming for net zero across their assets has decreased. While 56% of managers working towards net zero said they are on track, 40% admitted that “it is hard to say” at this stage.
Further, training on responsible investment topics is not a priority for the managers surveyed. Over half of the investment managers (51%) reported their investment professionals receive less than five hours of training each year. In response, LCP urges managers to identify and address gaps in their transition plans to help ensure a smoother path to achieving net-zero targets.
Despite this, there has been some progress. The percentage of managers working towards net-zero emissions for some of their assets has seen a 10% increase from LCP’s survey last year from 59% to 69%. Further, there has been some improvement in board oversight; 81% of managers now have someone at the board level responsible for overseeing ESG and stewardship, up from 67% in the 2022 survey.
Sapna Patel, principal at LCP and lead author of the report, said: “There is a higher level of board oversight of responsible investment activity at investment managers now than there was in our previous survey. Crucially, this oversight must go hand in hand with sufficient training for those board members, and this has not improved from a low base last time.
“Responsible investment is a complex and rapidly changing field, so it’s important that investment professionals and board members with oversight responsibilities receive sufficient training to stay up to date and make informed decisions.”
Claire Jones, partner and head of Responsible Investment at LCP, added: “More investment managers are talking about net zero, either proactively or in response to asset owner demand. While it is encouraging to see many managers believe they are on track to meet their net-zero targets, we need to see more managers targeting net zero across all their assets under management. Every portfolio matters for achieving net zero, so all assets, not just some, must be considered.
“Crucially, to protect portfolios from broader financial risks, these targets need to be backed up by actions that drive real progress toward net-zero emissions.”
