Download the full report
Australian institutional investors are increasingly keen to grow their exposure to renewables, energy storage, and clean infrastructure.
However, Australia is competing for that capital in global markets, and losing ground. Policy and regulatory uncertainty is worsening, and a lack of opportunities with appropriate risk-returns is pushing capital elsewhere.
A 20 percentage point jump in investors rating Asia as attractive for climate investment suggests that Australia’s trade partners could benefit from Australian capital flows.
“Investors see that the move to net zero is happening, but Australia can’t take their capital for granted.”
Rebecca Mikula-Wright, CEO, Investor Group on Climate Change
About the report
The State of Net Zero 2026 is IGCC’s ninth annual survey of Australian institutional investor climate practice; the most comprehensive and insightful dataset of its kind.
The 2026 edition draws on responses from 55 investors, including 21 major asset owners and 34 asset managers, collectively managing approximately A$3.5 trillion.
The report tracks investor behaviour across commitments and disclosures, governance, corporate stewardship, and policy engagement, and covers key climate themes, including the energy transition, climate solutions, fossil fuel risks, adaptation and resilience, and regional decarbonisation.
Key findings
Investor appetite for climate solutions opportunities is sharply increasing
- Energy Storage: Up 44 points in two years to 76%.
- Renewable Electricity Generation: Up 24 points in two years to 71%.
- Electricity Transmission: Up 13 points in one year to 71% (no data prior to FY25).
- Appetite for almost all other climate solutions is also up, with green infrastructure, green property, low-carbon transport, and low emissions fuels leading.
- Over one-third of investors now identify climate adaptation as an important investment opportunity. More than a quarter have already allocated capital to adaptation-related solutions.
Policy and Economic Conditions
- Almost three-quarters of respondents (74%) report no progress in removing barriers to climate-aligned investment in the past year. One in five say conditions have worsened.
- The primary barrier is a shortage of climate and clean energy investment opportunities with appropriate risk-return profiles, cited by 74% of respondents, the highest level recorded in the survey’s nine-year history.
- Policy and regulatory uncertainty is identified by 56%, the second consecutive year of worsening data. From FY22 to FY24 certainty had been improving.
Investors’ Climate Governance
- For the first time, more than 90% of investors have a formal climate policy — a landmark in nine years of tracking.
- More than two-thirds of asset owners have formally incorporated climate responsibilities into board charters, a 26 percentage point increase in a single year. Regular board reporting on climate-related financial metrics rose to 71%.
- More than two-thirds of investors now apply negative screens or exclusions to at least part of their portfolio, a significant increase from last year’s figure of 49%.
- Corporate engagement remains the dominant tool that investors use to manage the risks associated with investment in fossil fuel companies.
Regional Decarbonisation
- Asset owner appetite for climate investment in Asia jumped 20 percentage points, the largest single-year regional shift the survey has recorded.
The survey also records a shift toward systemic stewardship, with nearly half of respondents now engaging at a sector-wide or systemic level, reflecting growing recognition that many transition barriers require coordinated policy and industry responses. This augments investors’ direct engagement with high-emitting companies.
The economic and policy context
Australia’s superannuation sector is the world’s fifth-largest pool of capital and is on track to become the second largest by 2031.
For the past nine years, State of Net Zero data has tracked investors building their internal capacity to manage climate risk: strengthening governance structures; integrating physical risk into investment processes; and broadening corporate engagement.
This year’s report poses the questions of whether Australian policy settings will allow that capacity to translate into capital deployment at the scale required.
Australia needs A$630 billion in transition investment to meet its 2035 climate targets.[i] Its superannuation sector now exceeds A$4.5 trillion. Increasingly, the challenge is not the availability of capital, but of investable opportunities.
Despite significant recent reforms, including Australia’s proposed 2035 emissions reduction target of 62–70% and the development of six sector decarbonisation plans, investor sentiment on domestic conditions has not improved. Investors flag concerns about the durability of policy commitments across political cycles, the absence of policy to drive down emissions in key economic sectors, and conflicting signals in the energy market.
“The next phase of the transition will depend on whether governments can create the certainty and market conditions needed to put this capital to work,” said Mikula-Wright.
Upcoming policy reforms
The energy transition is at a crucial juncture with key forward-looking policy settings like implementation of the NEM review not yet settled, and coal fired power stations are extended by state governments.
Key policy mechanisms due for review and debate in the coming financial year include Australia’s capital gains tax settings for global investment into renewables, the Safeguard Mechanism (which applies a carbon price on approximately 30% of Australian emissions) and a proposed Carbon Border Adjustment Mechanism.
The survey data suggests that these policy reforms will have a big influence on whether capital flows to new clean energy and industry in Australia, driving down power prices and stimulating new economic growth.
[i] Boston Consulting Group, cited in Hon. Matt Kean, Chair, Climate Change Authority, “Turning climate ambition into an investable opportunity”, Climate Investor Forum, 18 February 2026.
Download the full report