A new study from Yale’s School of the Environment highlights how asset owners—those managing vast capital pools through pensions, endowments, foundations, and private holdings—are crucial players in driving climate-related investments. Owners of large portfolios increasingly see the importance of considering environmental impacts and aligning their financial goals with global climate targets. Yet, challenges persist, including perceived investment risks, limited climate finance expertise, and aligning green investments with existing portfolio goals.
“We see many bottlenecks to climate action,” the researchers explain. “Our focus here is on money—and the institutions that manage it—and understanding the forces shaping investment decisions in climate action.”
Meeting climate goals
Meeting the target of net-zero emissions by 2050 will require over $5 trillion in low-carbon investments annually by 2030, per the IMF. To explore the landscape of climate-focused investing, researchers interviewed more than 60 asset managers and owners with over $750 billion in assets. Their study delves into the factors that shape climate investment decisions, including legal structures, fiduciary duties, and climate expertise. The portfolios examined range from individual and family wealth to foundations, corporate pensions, endowments, and trusts.
The team employed a structured framework—the Four Stages of Organizational Change, comprising perception, evaluation, enactment, and feedback—to understand how asset owners are responding to climate imperatives.
The study revealed that investors respond to both formal obligations, such as fiduciary duties, and informal pressures from stakeholders advocating for climate action. Interestingly, fiduciary duty, often assumed to mean maximizing returns at all costs, is far more nuanced. “Maximizing returns is just one aspect,” the researchers clarify. “A fiduciary’s role involves balancing multiple goals, and this flexibility allows for climate-focused investments within a range of scenarios.”
Key findings show that while asset owners are often starting with low-risk climate investments, they’re increasingly aligning financial objectives with environmental goals. To accelerate progress, the authors recommend targeted interventions: training financial advisors on climate investment, extending investment horizons for sustainability, and engaging stakeholders and beneficiaries to encourage climate-focused investing.
“We created a roadmap that outlines how different stakeholders—whether individuals, companies, or advocacy groups—can influence asset owners’ climate choices,” the researchers conclude. This framework, they hope, will help more people find actionable paths to drive climate-conscious investing.
