Investors in real assets can propel the transition to a more sustainable future while also benefiting from portfolio diversification and attractive returns, says Mark Meiklejon.
The summer of 2022 could prove a turning point in the battle against climate change. Scorching heatwaves across Europe, China and the Horn of Africa have focused public attention on the reality of global warming. Meanwhile, Russia’s invasion of Ukraine has led to spiralling gas prices, prompting many countries to question their continued reliance on fossil fuels.
After years of foot-dragging among policymakers, the legislative agenda has a new momentum. The European Union’s wide-ranging REPowerEU plan aims to improve the bloc’s energy security by expediting the shift to renewables.1 In the US, the Biden administration has passed the Inflation Reduction Act, which includes an ambitious package of measures to reduce carbon emissions and promote green industries.2
The accelerating climate transition has important implications for investors in real assets. After all, the built environment is a major contributor to climate change: around 37 per cent of global carbon emissions are associated with the construction and maintenance of buildings.3 Inefficient, carbon-intensive real assets are likely to be affected by new green regulations and shifting demand patterns over the coming years. They may also be vulnerable to the physical risks of climate change, from extreme heat to floods and wildfires.
At the same time, real assets have an important role to play in tackling the climate crisis, while also delivering portfolio benefits for clients.
Our approach to investing in the climate transition through real assets seeks to achieve this by proactively decarbonising existing assets; acquiring and developing new, climate-friendly real estate; developing new infrastructure assets, including fibre broadband and electric vehicle (EV) charging networks; and by identifying opportunities to capture carbon via nature-based solutions.
Download ‘Building better: Investing in the climate transition through real assets’ to understand:
- How the climate transition is creating opportunities for real assets investors
- The portfolio benefits to be gained from investing in real assets aligned to the climate transition, including diversification, illiquidity premia and uncorrelated returns
- How direct investors in real assets can influence the carbon impact of their portfolios by reducing, avoiding and removing emissions