The State of Net Zero Investment in Australia

7 March 2023
A new survey of institutional investors managing $2.1 trillion in Australia shows encouraging progress towards net zero by 2050. However, acceleration is needed to hit 2030 decarbonisation milestones, and to protect beneficiary returns from physical climate damage and disruption.

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  • 70% of respondents have now set net zero targets for 2050:
    • 57% have set targets for their whole portfolio (up from 41% in 2021, 28% in 2020); and
    • a further 23% are considering setting 2050 targets.
  • 35% have now set decarbonisation milestone targets for 2030; and
  • 21% have set targets for capital deployment into climate solutions (for example renewable energy, clean transport etc).

These figures indicate significant progress from Australian investors in target setting, but acceleration and implementation is needed to achieve the goals of the Paris Agreement and drive down emissions in the real economy.

Physical Climate Risk:

  • 22% of respondents have assessed physical climate risk across their whole portfolios.
  • 9% have implemented a response to their physical risk exposure.

A higher proportion of investors surveyed are assessing physical risk compared with  ASX 200 companies (20%). Given the severity of projected climate impacts based on current trajectories, we expect these numbers to increase over the coming years, both for investors and for the companies they invest in.

Investments in Climate Solutions:

Asset Owners’ Expectations on Deploying Capital to Climate Solutions (such as renewable energy, clean transport etc):

  • 82% included Australia as a market where they expect to invest in climate solutions.
  • 69% included Europe.
  • 67% included North America.
  • 33% included Asia.

There is global competition for institutionally-managed Australian capital. Investors also indicated that capital deployment to Australian net zero investments would be supported by continued improvement in policy certainty, more investment opportunities that match risk-return requirements, and a 1.5°C-aligned national emissions targets.

Quote from Rebecca Mikula-Wright, CEO:

“Each year investors are making more progress, but we know that acceleration is crucial for meeting climate goals, and serving their beneficiaries.

“The good news is that there are now excellent tools and collaborative initiatives that investors can and must use to move faster than ever before.

“Helping investors set and reach 2030 milestones is core to IGCC’s work, as is building resilience to the physical risks from climate change.”

About the Report:

The Sample: Investors with $2.1 trillion Assets Under Management (AUM) domiciled in Australia, being approximately 60% of total local AUM. There were 53 respondents, with median AUM of AUD$28 billion. Many, but not all, are IGCC members. Responses were provided in Q4 2022 calendar year.

The Content: The report shows investors’ progress and the evolution of their approaches to transitioning to a net zero-carbon global economy, including setting targets, aligning assets with net zero, implementing net-zero strategies, deploying capital to climate solutions, and the barriers and challenges to moving faster.

36 data charts – 17 explainers – 16 case studies

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