DWS impact investing

 

A study by DWS and Create-Research reveals that pension funds are becoming increasingly interested in impact investing. However, their share can still be increased, as a closer look at the figures shows.

Pension funds rely on dws impact investing

Impact investing is generally understood to mean investment forms that formulate a further goal in addition to a financial return, especially in the social or environmental area. 

The study shows that the advance of impact investing is being driven by two data points in particular: Achieving the global net-zero goal by 2050 is likely to require $100 trillion in investments1. And achieving the United Nations' 17 Sustainable Development Goals (SDGs) by 2030 will require annual spending of $5 trillion to $7 trillion2. 

Due to their limited scalability, private markets cannot raise this capital on their own. In contrast, public markets, where instruments such as mutual funds and ETFs are traded, offer both the size and reach to mobilize the capital needed. 

The survey of 50 of the largest pension funds in North America, Europe, Asia and Australia shows how far this development has progressed. who together manage assets of 3.3 trillion euros. According to the study, 22 percent of pension funds have already implemented or are currently implementing impact investing as part of their passive investments.

"Pension funds increasingly see it as their duty to help curb the negative effects of previous economic development on the environment, climate and biodiversity on behalf of their retirees - there is still a long way to go, but the important first step has been taken," said Amin Rajan, Chief Executive of CREATE-Research.

Since the two goals of net zero and SDG can be achieved by rule-based indices such as the Paris-Aligned and Climate Transition Benchmarks of the European Union, SDG or Green Bond Indices, thematic passive commitments via ETFs and mandates can lead to a breakthrough in impact investing help the public markets. 

This thesis is confirmed by the present study : 58 percent of the survey participants believe that the increasing interest in thematic funds will continue to develop in impact investing over time. 64 percent believe the net-zero goal will favor impact investing, and 54 percent believe the SDGs will bring new opportunities. 28 percent of pension funds each expect to use SDG, EU Paris-Aligned and EU Climate Transition indices in the next three years.

“The important study by CREATE-Research shows that ETFs and passive mandates can make the decisive difference in helping impact investing to achieve a broad breakthrough. We are already seeing high demand from private and institutional investors for index concepts that formulate concrete goals and we will continue to expand our activities in this segment," said Simon Klein, Global Head of Passive Sales at DWS.

1 https://edition.cnn.com/2021/11/03/business/global-finance-climate-cop26/index.html

2 https://www.unglobalcompact.org/take-action/action/globalallianceforsdgfinance