Transition to Low Carbon: Investors View It as Less Inevitable in Recent Survey

Transition to Low Carbon: Investors View It as Less Inevitable in Recent Survey

In a significant shift, global institutions are prioritizing low-carbon transition, energy transition, clean energy, net zero goals, impact investing, and nature-based investments as fundamental elements of their portfolio construction. This strategic move, driven by the recognition of climate change as a foundational, systemic challenge, is reshaping investment management [1].

The survey, conducted among decision-makers at various types of institutions including corporate pensions, public/governmental pensions, insurance companies, endowments and foundations, superannuation funds, sovereign wealth funds, and central banks, reveals that 79% of those prioritizing nature-based investments are seeking strategies that go beyond sustainability to proactively mitigate environmental degradation [2].

The climate transition and net zero ambitions are viewed as drivers of a fundamental transformation in economies and capital allocation, prompting investors to integrate these themes strategically rather than tactically [1]. This shift in capital flow is towards clean energy infrastructure, decarbonization technologies, and sustainable natural resource management.

Impact investing and nature-related investing are increasingly included in diversified portfolios, as institutions seek both financial returns and alignment with environmental and social goals. This aligns with broader trends of portfolio resilience and avoiding stranded asset risks in fossil fuels, as well as capturing growth opportunities in green sectors [1][4].

Asset allocation trends in 2025 emphasize alternatives, equities, and real assets over traditional fixed income instruments, reflecting confidence in sectors aligned with energy and environmental transition themes [4].

While market volatility and geopolitical uncertainty persist, investors maintain focus on long-term growth sectors, including technology and sustainability-related industries, blending innovation (e.g., AI) with environmental goals [1][5].

Sectors such as water and waste management, pollution reduction, and recycling are emerging as key opportunities in nature-related investing, offering a dual benefit of environmental risk mitigation and attractive return potential.

The survey covered 800 institutions globally, spanning North America, Europe, Middle East and Africa, and Asia Pacific, in October and November 2024. 44% of institutions have net zero commitments, and another 25% plan to in the coming 12 months [2].

Insurers are focusing more on positive impact metrics and benchmarking to the United Nations' Sustainable Development Goals in their responsible investing approach. The vast majority of investors with 2025 goals claim they are on track or partially on track to meet those targets [2].

Insurers are demonstrating an increasingly confident and sophisticated approach to portfolio construction, focusing on private credit, infrastructure, and sustainability-aligned investments. Over half (55%) of institutions report managing a separate sleeve in their portfolio for impact investments [2].

Interim milestones are gaining traction among institutions working towards net zero goals (Nuveen survey). More than half of institutions (51%) with net zero goals have set interim 2030 targets, while 37% have established 2025 benchmarks [2].

While 45% of institutions identify nature loss as a top five economic risk, only three in 10 are increasing their focus on nature-related themes within their portfolios [2].

61% of investors now view the low-carbon transition as inevitable, compared to 79% in 2022 (Nuveen survey). Even among those who do not intend to set net zero commitments, the majority (64%) still invest in clean energy strategies or reduce carbon in their portfolios (Nuveen survey).

73% of investors agree that near-term energy needs cannot be met without incorporating both traditional and renewable energy sources (Nuveen survey). 93% of institutions are either incorporating or planning to incorporate environmental and social impact factors into their investment strategies [2].

In summary, global institutions are deepening their commitment to sustainable and impact-driven investments, explicitly targeting the low-carbon and clean energy transitions as core pillars of their strategic asset allocation and risk management.

1. In the light of the global institutions' prioritization, environmental science, such as nature-based investments and sustainability-focused portfolios, is increasingly intertwined with finance and investing, as institutions aim for both financial returns and alignment with environmental and social goals.
2. As climate-change implications continue to shape investment management, the growth sectors of interest include not only technology but also environmental science sectors like water and waste management, pollution reduction, and recycling, which not only offer environmental risk mitigation but also attractive return potential.

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