Global investors to raise allocations to private markets, remain committed to clean energy: survey

[SINGAPORE] Despite the current backlash against environmental, social and governance (ESG) investing, a survey by US asset manager Nuveen shows that 88 per cent of global institutional investors are injecting, or planning to inject, funds into clean energy opportunities.

They also hold a more pragmatic view of energy transition, as 73 per cent of the 800 surveyed said that traditional and renewable sources are needed to meet near-term needs, said Nuveen in a statement on Wednesday (Mar 19).

Nuveen, which counts US$1.3 trillion in assets under management (AUM), said that the investors’ “commitment to clean energy remains strong, with most institutions prioritising clean energy and carbon reduction either as part of net-zero goals or to capture compelling risk-return opportunities”.

Investment clients pulled out record amounts of money from ESG funds in the US last year, according to market researcher Morningstar. Investors are turning away from a strategy plagued by lacklustre returns, regulatory fatigue and political backlash. The situation is not better in the European Union, where funds complying with the region’s strictest ESG standards suffered record outflows in the last quarter.

In the Nuveen survey conducted in October and November last year, 44 per cent of the institutional investors that represent US$19 trillion in AUM said that they have net-zero commitments.

Investing more in private markets

As for the broader private markets space, 66 per cent of the respondents said they plan to pump in more funds into the asset class over the next five years.

That is building on their increased exposure in the past four years – more than 90 per cent of them now hold private equity and private credit, from 45 per cent in 2021, noted Nuveen.

“Private-market flows remain resilient, with funding sourced from public-asset outflows, cash reserves and new capital,” said Harriet Steel, global head of institutional at Nuveen. “Even those adjusting allocations within private markets are largely reallocating rather than exiting.”

Japanese and Australian investors were the most aggressive, with 75 per cent planning to increase their private-market investments.

Private infrastructure, credit and equity are the top three sectors drawing investor attention – nearly half of those surveyed by Nuveen planned to raise allocations to these areas.

The respondents comprised investment decision-makers such as portfolio managers and chief investment officers from institutional investors spanning pension funds, insurance companies and sovereign wealth funds from 29 countries.