Global Investors Increase Focus on Portfolio Emissions

More than half of the world’s largest institutional and wholesale investors said they are assessing the impact of their portfolios on carbon emissions, according to results of Robeco’s annual climate survey.

The asset management firm’s study examined how investors approach the risks and opportunities associated with climate change. The survey covered 300 of the world’s largest institutional and wholesale investors in Europe, North America, Asia-Pacific and South Africa, representing a total of about $27.4 trillion in assets under management.

According to this year’s report, 48% of respondents have set a net-zero target for carbon emissions, slightly higher than the 45% who reported that commitment in 2022. Those companies are now turning to the tougher task of implementing those commitments, according to Robeco’s research.

However, investors are lagging on Scope 3 emissions, measured by only 20% of investors, and 27% have obtained a “forward-looking view of investee companies’ emissions pathways, which is critical to investment opportunities, engagement and divestment decisions,” Robeco reported.

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Investors are backing renewables, with 51% saying the energy crisis has reinforced their value, but 30% have accelerated their portfolio decarbonization efforts, reflecting the impact of energy security and scarcity on risk-and-return calculations.

“This shows the hard journey of investors implementing and delivering on commitments, particularly net-zero commitments,” says Lucian Peppelenbos, a Robeco climate and biodiversity strategist. “We continue to see strong momentum on the climate and expanding into biodiversity and the Just Transition [sustainability framework], but now it’s the hard job of implementation, such as setting interim targets and assessing Scope 3 emissions.”

Against those net-zero commitments, nearly half of investors (47%) have reviewed some of their environmental, social and governance approaches to avoid short-term underperformance, including unwillingness to miss out on strong returns in the oil and gas sector. More than a third of investors in Europe have been allowing higher allocations to oil and gas companies in the short term, rising to 48% in North America and 59% in Asia Pacific.

However, divestment from carbon intensive stocks, particularly the oil and gas sector, continues to be a tool that investors say they will use: “Fourteen % of investors with a net-zero target in place say their current approach is to completely divest from oil and gas companies, and 23% with a net-zero target say they will do this in the next two years,” the Robeco report stated. For investors who said they are in process of setting a net-zero target, 39% say they will completely divest from oil and gas companies in the next two years.

“I was quite surprised about the continued drive for divesting from carbon intensive stocks, despite fluctuations in the energy markets,” Peppelenbos says. “There is more allocation to renewable energy and a continued decarbonization drive, which was interesting to see.”

The findings align with Robeco’s own net-zero ambitions and inform how the global fund manager supports its clients’ plans.

“Our net-zero plan has three commitments: decarbonizing our own commitments; stewardship—accelerating the transition in countries where we invest; and a third one, which is about promoting climate investing with clients and the broader industry,” Peppelenbos says.

The survey indicates a significant take-up of climate change scenarios, with 25% of investors having either already integrated these into capital market assumptions or reporting they are likely to do so in the next 12 months. Furthermore, 29% have adopted or will adopt climate-tilted benchmarks over the next year.

The report also picked up on the bifurcation of political stances on ESG.

In the backdrop of the anti-ESG movement in the U.S., 47% of investors in North America reported being concerned about rising political and legal resistance to their sustainable investment plans, versus only 30% in Europe.

A majority of European (63%) and Asia Pacific (57%) investors, on the other hand, reported concern about political pressure for failing to act on ESG- and climate-related considerations, compared to a minority in North America (40%) that shared that concern.

This article initially appeared in our sister publication, FS Sustainability, which, like CIO, is owned by Institutional Shareholder Services Inc.

Tags: Biodiversity, ESG, just transition, Lucian Peppelenbos, Net Zero, Robeco, Sustainability

A former managing director of Goldman Sachs recevied a 10-year prison sentence for conspiring to launder billions of dollars that had been embezzled from 1Malaysia Development Berhad, Malaysia’s state investment fund.

According to court documents, between 2009 and 2014, Ng Chong Hwa, also known as Roger Ng, laundered billions of dollars that had been misappropriated and fraudulently diverted from 1MDB. This includes money the Malaysian pension fund raised in 2012 and 2013 through three bond transactions with Goldman Sachs—allegedly in exchange for bribe money.

Ng and his co-conspirators, including Goldman Sachs’ former Southeast Asia chairman and participating managing director Tim Leissner, allegedly paid more than $1 billion in bribes to 12 government officials in Malaysia and the United Arab Emirates to obtain and retain business for Goldman Sachs, including the 2012 and 2013 bond deals.

According to the indictment, Ng and his co-conspirators laundered the proceeds of the ill-gotten funds through purchasing a $51 million Jean-Michel Basquiat painting from Christie’s auction house, a $23 million diamond necklace, millions of dollars in Hermès handbags and luxury Manhattan real estate, among other things. Ironically, the laundering also allegedly included funding major Hollywood films, including “The Wolf of Wall Street,” a film about corruption and fraud in finance.

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“Roger Ng was a central player in a brazen and audacious scheme that not only victimized the people of Malaysia, but also risked undermining the public’s confidence in governments, markets, businesses and other institutions on a global scale,” U.S. Attorney for the Eastern District of New York Breon Peace said in a release.

The Department of Justice said Ng spent years cultivating a relationship with wealthy Malaysian socialite Low Taek Jho—also known as Jho Low—to take advantage of Low’s close relationships with high-ranking government officials in Malaysia and the United Arab Emirates, whom Ng allegedly bribed. It also said that Goldman Sachs, through its work for 1MDB during that time, received approximately $600 million in fees and revenue, while Ng received $35 million for his role. In total, Ng and his co-conspirators misappropriated more than $2.7 billion from 1MDB, according to the Justice Department.

When Ng tried to make Low a private wealth management client for Goldman Sachs, he allegedly lied to the firm’s compliance personnel about his relationship with Low when confronted with questions about Low’s government connections and source of wealth. Ng also allegedly communicated with Low about business opportunities using personal email accounts to avoid detection by Goldman Sachs compliance.

Leissner, who is awaiting sentencing, pleaded guilty in 2018 for conspiring to launder money and conspiring to violate the Foreign Corrupt Practices Act of 1977. He was ordered to forfeit $43 million and shares of stock worth more than $200 million. Low remains a fugitive at large.