DWS sponsored survey: uncertainty over net zero ambitions as pensions funds make progress on sustainability

Latest DWS-sponsored CREATE-Research survey of major pension funds shows progress but also a reality check on pension fund net zero ambitions
Over 50% of pension funds surveyed have embedded or are embedding a net-zero strategy into their portfolios, but many believe it unlikely their net zero aims will be achieved under current conditions
Over 50% of pension funds view passive investments as a permanent feature of their climate portfolios

The majority of pension funds have either embedded or are in the process of embedding climate change goals into their investment portfolios, according to the latest DWS-sponsored survey of global pension funds from CREATE-Research. However, a bigger push is required if pension funds are to meet their net zero ambitions, with 60% of those surveyed believing their net zero aims will not be met under current conditions. This suggests more bespoke solutions and the focus on stewardship could be more important than ever.

The survey of 50 large pension funds based in North America, Europe and Australasia, which collectively manage EUR 3.3 trillion in assets (as at 31, December 2021), found 16% of respondents have fully embedded climate change goals into their investment portfolios. Forty-two percent are in the process of implementation, with 22% close to decision-making and 20% at the awareness-raising stage. Net zero strategies are therefore being pursued by almost three in five respondents.

"Although many pension funds are being highly proactive when it comes to climate change, it is clear that the pensions sector is still in the foothills of net zero action," said Amin Rajan, Chief Executive of CREATE-Research.

Fifty-six percent of pension funds surveyed view passive investments as a permanent feature of their climate portfolio, while the same number, 56%, expect to the use Paris-aligned indices "on a notable scale". Forty-two percent of pension funds have adopted or are adopting climate investing into their passive portfolios.

The survey also found that 80% of pension fund participants use stewardship as the principal vehicle of climate investing, with 78% engaging in proxy voting and shareholder resolutions.

The survey finds that in passive funds only 28% of respondents are still in the 'awareness raising' phase of implementing climate investments, down from 43% in the 2020 survey. Twenty-four percent of respondents now classify themselves as being in the 'mature' phase of implementation, up from 21% in 2020. More pension funds are therefore embracing sustainable index investments.

"We are delighted to once again sponsor this important survey from CREATE-Research. The survey shows that more pension funds are moving along the path to embracing sustainable investing, including the latest ESG index products. But more work clearly needs to be done, by institutional investors and investment solution providers, if we are to reach net zero," said Simon Klein, Global Head of Passive Sales at DWS.

The full report “Net zero: Going beyond the hype: Passive Investing 2022” can be found here.

About DWS Group

DWS Group (DWS) is one of the world's leading asset managers with EUR 908bn of assets under management (as of 31 March 2022). Building on more than 60 years of experience, it has a reputation for excellence in Germany, Europe, the Americas and Asia. DWS is recognised by clients globally as a trusted source for integrated investment solutions, stability and innovation across a full spectrum of investment disciplines.

We offer individuals and institutions access to our strong investment capabilities across all major asset classes and solutions aligned to growth trends. Our diverse expertise in Active, Passive and Alternatives asset management – as well as our deep environmental, social and governance focus – complement each other when creating targeted solutions for our clients. Our expertise and on-the-ground-knowledge of our economists, research analysts and investment professionals are brought together in one consistent global Chief Investment Office (CIO View), which guides our investment approach strategically.

DWS wants to innovate and shape the future of investing: with approximately 3,600 employees in offices all over the world, we are local while being one global team. We are investors – entrusted to build the best foundation for our clients’ future.

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