European investors are ‘doubling down’ on sustainability and energy transition investment opportunities, despite geopolitical uncertainty, inflation and broader market risks, according to new data from IFM Investors.
Among investors in the EMEA region, four fifths (81%) said that they believe the energy transition will be a ‘long-term source of attractive private market opportunities’, compared to 72% at a global level.
In addition, 38% of European investors identified environmental and renewable energy as among their top three areas for future investment, compared to 30% at a global level.
The data comes from IFM Investors’ annual Private Markets 700 (PM700) survey, which featured input from more than 700 senior investment professionals across 19 countries.
‘Exceptionally strong’
“The notable finding is not that European investors focus on sustainability,” commented Maria Nazarova-Doyle, global head of sustainable investment at IFM Investors. “It is that their focus remains exceptionally strong despite ongoing geopolitical tensions, inflation concerns and broader market uncertainty.
“European investors increasingly view sustainability, energy security and long-term economic resilience as complementary rather than competing objectives. The transition to a lower-carbon economy continues to drive significant value creation opportunities across energy, infrastructure and private markets.”
Finding a balance
IFM Investors’ survey also found that investors are increasingly force to balance sustainability ambitions with a myriad of economic and geopolitical risks.
Some 55% of European investors cited geopolitical instability as a leading risk to their portfolios, while just over half (51%) cited inflation as a significant concern. More than two thirds (68%) of EMEA investors said that they are focusing their private market allocations closer to home in Western Europe.
IFM Investors said the findings indicate that sustainability, energy security and economic resilience are increasingly being considered as complimentary investment opportunities for their portfolios, with 63% of investors globally planning to increase infrastructure equity allocations over the next three to five years.
Notably, most respondents also see technology as playing a key role in sustainability investment decisions, with 71% of respondents noting that exposure to long-term trends including AI, digitalisation and the energy transition would be ‘essential’ to achieving future return objectives.
‘Baseline expectation’
“What PM700 suggests is that sustainability has moved from being a differentiator to becoming a baseline expectation of sound portfolio management,” Nazarova-Doyle commented. “Investors are increasingly looking for managers that can demonstrate credible, measurable sustainability value creation as part of their strong investment track record.
“Infrastructure can play a critical role in portfolios over the next decade and beyond. Whether investing in renewable energy generation, electricity networks, digital infrastructure or energy security, investors increasingly recognise that many of the world’s most lucrative investment opportunities require structured long-term stewardship to generate returns and manage systemic risks.” Read more here.
