Climate potential for European asset managers estimated at a staggering $11.7 trillion by JP Morgan Asset Management
In the ever-evolving landscape of global finance, European asset managers are making significant strides in sustainable investing, capitalising on a growing appetite for credible climate strategies among asset owners.
According to JP Morgan Asset Management, some of the firms predicted to benefit most from this trend are Amundi, DWS, Schroders, and abrdn. These asset managers are highlighted for their strong alignment with robust climate objectives and their ability to meet the growing demand for sustainable investment solutions among asset owners.
This shift towards sustainability is part of a broader context, with an estimated $11.7 trillion capital shift expected as asset owners increasingly prioritise sustainability in their investment decisions. JP Morgan’s analysis underscores that managers who embed sustainability deeply into their investment processes and offer credible climate strategies are set to capture a substantial share of this market.
The top 30 managers in ShareAction's annual league table assessing stewardship commitments are all European, with the exception of Federated Hermes, which ranked 27th. Amundi and DWS are considered to be in the strongest position to take advantage of this trend, due to both their size and their passive offerings.
Meanwhile, the New York City pension fund is reviewing the net zero strategies of the managers it invests with, reflecting a broader trend among asset owners to scrutinise their investment managers' commitment to climate change. The People's Pension in the UK has also divested $28bn from State Street, citing climate concerns, while AkademikerPension in Denmark divested $400m from a US manager for similar reasons.
By contrast, outsourcing investment management is more prominent in Oceania and Asia, where only 20% of assets are managed in-house, compared to Europe where a significant portion of assets are managed this way. Asia represents the largest opportunity in terms of total assets ($3.4trn), followed by North America ($1.5trn) and the Middle East ($1.4trn).
However, the past year has seen some of the world's largest asset managers stepping back from climate pledges, and there is growing discontent among asset owners wishing to pursue a more ambitious net zero strategy in Europe. This discontent could offer a business opportunity for firms maintaining a strong stance on climate, as asset owners seek managers who align with their sustainability goals.
JP Morgan Asset Management notes that while the reversal by asset owners has been limited, $17.9 trillion in assets under management are overseen with consideration for sustainability and active ownership. Dutch pension funds PGGM and PME, as well as CalSTRS, have made climate commitments a priority when selecting managers, indicating a shift towards more sustainable investment practices.
In conclusion, European asset managers are well-positioned to capitalise on the increasing demand for sustainable investment solutions. Firms that embed sustainability deeply into their investment processes and offer credible climate strategies are likely to capture a substantial share of the $11.7 trillion capital shift expected in the coming years. Meanwhile, asset owners are increasingly scrutinising their investment managers' commitment to climate change, creating opportunities for firms that maintain a strong stance on this critical issue.
In light of the growing trend towards sustainable investing and the $11.7 trillion capital shift anticipated, firms like Amundi and DWS, highlighted for their robust climate objectives and credible strategies, stand to benefit significantly in the environmental-science domain of finance. This opportunity arises as asset owners, such as the New York City pension fund and The People's Pension in the UK, are increasingly reviewing and scrutinizing their investment managers' approaches to climate-change.
