Will supply meet demand?
Today, more and more investors are looking to invest in companies
that can be part of building a better future. While some describe it
as a ‘trend’, ESG investing has shown that it is here to
stay and is growing into a dominant force. Why would we say so? In
recent years, leading institutional investors have been steadily
rebalancing their funds toward investments that have strong ESG
qualities. We are now often seeing large reported movements such as
”UK pension scheme pledges £5.5bn for green
strategies” - Financial Times, July 20, 2020 and
”Heavyweight Nordic investment trio makes €4bn green
infrastructure pledge” Responsible Investor, Nov. 10, 2020.
More investors are also seeking green bonds, as shown by
Germany’s first-ever sovereign green bond in 2020 that raised
EUR6.5 billion and was five times oversubscribed. Or we can look at
the movements from the UN-convened Net-Zero Asset Owner Alliance,
who represent over USD5 trillion in assets. It is a remarkable sum
from an international group of 66 institutional investors who are
committed to transition their portfolios to a net-zero greenhouse
gas emissions by 2050.
”Germany Seizes on Demand for Green Debt With $7.7 Billion
Debut.” Bloomberg. Sept. 20, 2020.
”Institutional investors transitioning their portfolios to
net zero GHG emissions by 2050.” UNEP’s Finance
Initiative. Nov. 19, 2020
Accordingly, the supply of such investment opportunities should grow
over time given the support of stronger policy measures and
development of more robust carbon markets. We can even see that here
in Malaysia, where Budget 2022 and the recent 12th Malaysia Plan
have made the green economy a major focus point. This is nothing
spectacular, but it is in line with what many countries worldwide
are shifting towards.
In the meantime, given the growing momentum, investors will likely
be aggressively seeking green assets and potential breakthrough
technologies that are on the horizon.