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1、2023 Global Asset Manager Survey Seeking to accelerate transition in emerging markets:overcoming barriers and increasing connectivity 2023 Global Asset Manager Survey2Although signatories to the 2015 Paris Agreement are seeking to address climate change through government commitments and policy leve
2、rs,it is investors who are tackling the problem of where and how to deploy capital in support of climate goals.Asset owners and managers are not yet managing transformative portfolios which incorporate assets supporting the transition from an extractive fossil fuel-based economy to a green economy a
3、t scale.At COP28,the first Global Stocktake1 since the signing of the Paris Agreement will provide decision-makers with a comprehensive assessment of progress to date.In the same spirit,by“taking stock”of progress across global investment strategies,Mercer seeks to gain a better understanding of the
4、 ways in which climate action is taking shape across portfolios from the key drivers of progress to the gaps that still need to be addressed.To build a more holistic picture of how transition is being enabled by investment strategies and how it is set to evolve,Mercer surveyed more than 200 global a
5、sset managers including more than 100 managers investing in emerging and frontier markets with aggregate assets under management of over US$30 trillion.Building on our 2022 study,this year we sought to drill down into how transition is taking place across emerging and frontier markets.We include in-
6、depth analysis on the ways in which asset managers are investing across emerging and frontier regions on an asset class and regional basis.IntroductionSection 1:Assessing policies,positions and progress We assess global asset managers current climate investment policies and approaches,gauging year-o
7、n-year changes across:Climate and sustainable investment policies.Net-zero target setting and the incorporation of climate-related metrics into investment decision-making.The rise of emerging transition themes,including biodiversity,social impact,adaptation,and the Just Transition across managers st
8、rategies.2 Section 2:Evolving transition in emerging markets We build a snapshot on the scope,scale and evolution of investment strategies which support climate transition across emerging and frontier markets,encompassing:In-depth analysis on the views of asset managers investing across asset classe
9、s in emerging and frontier regions.The current barriers to implementation and increasing capital allocations across emerging and frontier markets.Managers views on the key drivers of increased commitments across the emerging and frontier market economies.Our study is structured around two key sectio
10、ns:2023 Global Asset Manager Survey3Key findingsSection 1:Assessing policies,positions and progress Scope Of Policies:Over the past 12 months,global asset managers have expanded the scope of their sustainable investment commitments across their policies:80%incorporate fair labor practices,health and
11、 safety and human rights within their investment policies,a significant rise from 64%last year.40%have policies which address how they incorporate impact investment outcomes within their strategies,a significant increase from 27%in 2022.49%have policies which address how biodiversity considerations
12、are factored into their strategies.Net-zero:While the proportion of managers reporting net-zero targets and intention to set targets has increased,the scope of commitments across total assets remains limited for the majority of managers.35%report having set net-zero targets,an eight-percentage-point
13、 year-on-year increase from 27%in 2022.44%have not set net-zero targets and do not plan to introduce these objectives in the next two years this represents an increase in managers which are not committing to net-zero targets in the short term.In 2022,only 38%said they had no ambitions to set net-zer
14、o targets.75%track the carbon intensity of investee companies within their strategies,up from 61%a year ago.74%of managers track absolute emissions,up from 58%in 2022.58%of managers who have set net zero targets have committed less than 5%of their total assets to their net-zero target.However,nearly
15、 a quarter(23%)of managers who have set net-zero targets,have committed more than half of their assets towards their net-zero targets.Expanding Transition:The majority of managers are assessing adaptation and resilience to physical risks,just transition,nature and biodiversity loss A significant pro
16、portion(72%)of managers are incorporating adaptation and physical resilience across investment policies.58%of managers report having undertaken physical climate risk assessment across their strategies,a significant rise from 35%in 2022.While 51%consider a Just Transition when making investment decis
17、ions,a much smaller proportion of managers(30%)have developed just transition policies.Nearly three-quarters(73%)of asset managers we surveyed consider risks and opportunities related to nature and biodiversity loss in at least some strategies that they manage.2023 Global Asset Manager Survey4Key fi
18、ndingsSection 2:Evolving transition across emerging markets Scope of allocations:Among managers investing in emerging or frontier markets,Asia is the most prevalent region for investment,while public equity is the most commonly invested asset class across all regions.81%of emerging market managers a
19、re invested in listed equities,with more than eight in 10 reporting allocations across Africa(85%),Latin America(85%),Asia(84%)and Eastern Europe(88%).40%are invested in fixed income across emerging and frontier markets,where a greater proportion of managers invest in Africa(53%)and Eastern Europe(5
20、1%)relative to Latin America(44%)and Asia(41%).Just 13%of emerging market managers report current exposure to private equity;7%have exposure to infrastructure,private debt and/or real estate.Only 12%of emerging market managers have exposure to impact strategies.Barriers and outlook for capital flows
21、:Managers expect asset owner appetite for emerging market allocations to increase,although concerns around transparency may continue to limit investment volumes into emerging and frontier markets.Managers view insufficient transparency and disclosure on company environmental,social and governance ES
22、G factors(78%)and company financial reporting(77%)as the most significant impediments to international investors allocating to equities,bonds or real assets in emerging and frontier markets.70%cite regulatory inhibitors,particularly for investors based in OECD markets,as a barrier.54%identified insu
23、fficient transparency on deal counterparties and other investors in emerging market assets or projects,including,for example,having adequate visibility on creditors and associated terms.42%think most investment opportunities in these markets are too subscale for institutional investment.26%regard a
24、lack of blended finance vehicles as a barrier to facilitating investment in emerging and frontier markets.Unlocking increased allocations:Emerging market managers continue to believe that increased adherence to globally recognized sustainable reporting frameworks is key to allaying persistent transp
25、arency concerns.63%of managers view adherence by local issuers and operators to globally recognized sustainable reporting frameworks,such as the Task Force on Climate Related Financial Disclosures(TCFD)3,as the most impactful driver of increased sustainable investment across emerging and frontier ma
26、rkets.If more investment opportunities were available in emerging and frontier markets:42%of emerging market managers would favor publicly listed companies with an emerging or frontier footprint,but specify a preference for those listed in OECD markets.31%of emerging market managers would favor publ
27、icly listed companies with emerging and frontier footprints,but specify a preference for those listed on local exchanges.Only 7%would favor privately held companies with an emerging or frontier footprint with specific asset profiles for example,solar electricity generation.2023 Global Asset Manager
28、Survey5Section 1:assessing policies,positions and progress How are global asset managers approaching sustainable and transition investing?i.Policies and memberships In 2022,our COP27 survey evidenced significant divergence in asset manager approaches to sustainable investment commitments and policie
29、s,at both firm and strategy level.Over the past 12 months,asset managers have expanded the scope of their ESG commitments,particularly with regard to fair labor practices,health and safety,and human rights.The overwhelming majority(96%)of managers have a firmwide ESG or sustainable investment policy
30、 in place,up from 90%a year ago.While managers implementation of sustainable investment policies may vary widely in practice often making direct comparison challenging for asset owners having a policy is now a baseline expectation.At a strategy level,managers incorporation of specific aspects of sus
31、tainable investment has evolved quite significantly over the past 12 months:Eight in 10(80%)have policies to incorporate fair labor practices,health and safety,and human rights into their strategies,a significant rise from 64%of managers last year.More than half of managers(57%)have policies that ad
32、dress how they incorporate the United Nations Sustainable Development Goals(UN SDGs)4 into their portfolios,up from 47%last year.Significantly,40%have policies which address how they incorporate impact investment outcomes within their strategies.This represents a significant increase from 27%in 2022
33、.The notable increase in the proportion of managers incorporating these factors as dedicated focus areas within policies is perhaps indicative of the degree to which these themes are informing investment decision-making and risk management across strategies.Although impact and UN-SDG frameworks may
34、not be relevant,or applicable,to all strategies,we observe both asset owners and managers assessing the“real-world”impacts of allocations to a greater degree.Broader consideration of real-world impacts and UN SDGs can support investors targeting specific climate objectives through their allocations.
35、20222023 ESG90%97%Fair Labor Practices,Health and Safety and Human Rights64%80%The UN SDGs47%57%Net-zero transition targets59%53%Impact investment outcomes27%40%Figure 1.In your organization,is there explicit reference to the below and/or separate policies that address how you incorporate the follow
36、ing into the portfolios you manage?In focus in 2023 Climate adaptation/physical resilience72%Nature/biodiversity49%Just transition30%2023 Global Asset Manager Survey6Biodiversity in focus The interdependence of climate change and nature loss highlights the relevance of an expanded definition of tran
37、sition investing beyond a linear assessment of reductions in carbon emissions across portfolios.The United Nations Biodiversity Conference(COP15)in December 2022 resulted in the adoption of the Kunming-Montreal Global Biodiversity Framework(GBF),an agreement supporting global action on nature and bi
38、odiversity through to 2030.5 Today,capital allocations to nature-based solutions seeking to mitigate the impacts of climate change on nature and biodiversity loss remain small in volume.Bloomberg estimates that US$1trillion of natural capital spending is required annually between now and 2030,a sign
39、ificant rise from current levels which remain in the low billions.6 Addressing nature loss and supporting biodiversity remains relatively nascent as an investment theme;Mercers recent Large Asset Owner Barometer7 indicated that just 16%of large asset owners(portfolios in excess of US$5billion)have d
40、edicated policies on their approach to biodiversity.However,we have seen managers launching and promoting strategies that address transition through nature-positive investing.In our survey,nearly half(49%)of managers address how biodiversity considerations are factored into their strategies within t
41、heir investment policies.Physical risk and adaptation The physical risks of climate change are already material to many portfolios and asset values.They encompass chronic damage(longer-term shifts in climate patterns causing sea-level rises or heat waves,desertification)and acute damage(major catast
42、rophes from storms,wildfires,droughts and floods).The impacts can be direct and indirect through supply chains and other interdependencies and they are also closely linked to the availability of natural resources water,food,materials,and biodiversity loss.Assessing and responding to these climate ri
43、sks in portfolios is core to the transition of assets in a decarbonizing economy.The degree to which managers are incorporating adaptation and physical resilience across their strategies is notable;nearly three quarters(72%)include considerations of adaptation and physical resilience within their in
44、vestment policies.Incorporation of a just transition A just transition seeks to ensure that no one is left or pushed behind through the transition to low-carbon and more environmentally sustainable economies and societies.8 While just over half(51%)of managers consider a just transition when making
45、investment decisions,a much smaller proportion of managers(30%)have developed Just Transition policies.2023 Global Asset Manager Survey7Commitments to external sustainable investment bodies and initiatives Given the scope and range of methodologies across climate and sustainable investment framework
46、s,investors may find it challenging to compare managers climate commitments,particularly in relation to determining the scope of assets aligned to specific targets,such as net zero.Public commitments to responsible,sustainable and transition investment bodies provide a gauge of managers priorities a
47、nd their commitment to specific goals and outcomes.This is a lever that many managers are drawing on;just 12%of managers are not signatories to any external sustainable and or climate-focused bodies.The majority of asset managers(83%)surveyed are signatories to the UN Principles for Responsible Inve
48、stment9 (rising to 100%of managers with AUM in excess of$101billion);nearly half(48%)are signatories to the TCFD(with TCFD-compliant reporting now mandatory across G7 markets).Just under a third(31%)of managers are signatories of Climate Action 100+,while a quarter(25%)are members of the Net Zero As
49、set Managers Alliance.20%are signatories to the Institutional Investors Group on Climate Change(IIGCC),a body first established in 2001 as forum for collaboration between pension funds and asset managers regarding climate change related issues.In 2019,the Investor Group on Climate Change(IGCC)set up
50、 the Paris Aligned Investment Initiative,a global collaboration supported by four regional networks:Asia Investor Group on Climate Change(AIGCC),Ceres,IGCC and IIGCC.Over a third(34%)of managers are part of at least one body comprising the global consortium of the IIGCC,IGCC and AIGCC.Biodiversity a
51、 priority for external commitments Although a smaller percentage have signed up,the fact that 22%of managers are signatories to biodiversity and nature related pledges indicates the growing importance of this theme in investment decision making;9%of managers are signatories to the Finance for Biodiv
52、ersity Pledge and 13%are signatories to the Taskforce on Nature-related Financial Disclosures.2023 Global Asset Manager Survey8ii.Net-zero target setting and tracking Although the proportion of managers reporting net-zero targets has risen year-on-year,science-based net-zero targets remain the prese
53、rve of a small minority.Far more prevalent is the tracking of net-zero commitments,as well as carbon emission data and metrics of portfolio companies.This practice has become more widespread among managers over the past year.Just over a third(35%)of asset managers report having set net-zero targets,
54、an eight-percentage-point year-on year increase from 27%in 2022.Just under a fifth(19%)of managers have a science-based net zero target in place,up from 16%last year.16%report having set net zero objectives which are not yet science-based.The larger the manager,the more likely they are to have set a
55、 science-based net-zero target:just 5%of the smallest managers(with AUM under US$2billion)have set such a target,relative to 38%of the largest firms(with AUM in excess of US$250billion).While more than a fifth(22%)plan to set a net-zero target over the next two years,the proportion of managers inten
56、ding to set a net zero objective within this time frame has fallen year-on-year,from 36%in 2022.More than two-fifths(44%)of managers have not set net-zero targets and do not plan to introduce these objectives in the next two years.This represents an increase in managers which are not committing to n
57、et-zero targets in the short term.In 2022,only 38%said they had no ambitions to set net-zero targets.Figure 2.Have you set net zero transition targets for your strategies?2023202219%16%22%44%16%11%36%38%0%10%20%30%40%50%Yes,and theyare science-basednet zero targetsYes,but they are not yet science-ba
58、sednet zero targetsNo,but we intend toset Net-Zero targetswithin the next 1-2 yearsNo,and we do intend toset Net-Zero targetswithin the next 1-2 yearsDespite the proportion of managers setting net zero targets remaining relatively low,the majority track both net-zero commitments as well as carbon em
59、ission data and metrics across portfolio companies.Three-quarters(75%)of asset managers track the carbon intensity of investee companies within their strategies,up from 61%a year ago.A similar proportion(74%)of managers track absolute emissions,up from 58%in 2022.In our work with asset owners to dev
60、elop,implement and report on emissions metrics,we define the scope of emissions captured be it CO2 or other greenhouse gases GHGs and prioritize absolute emissions,in support of real-world emissions reductions necessary for a 1.5-degree Paris-aligned pathway,as opposed to carbon intensity.It is enco
61、uraging to see this practice becoming more widespread across managers strategies.Over a quarter(27%)of asset managers surveyed track the carbon intensity of the supply chain of investee companies in their portfolios,a consistent proportion year-on-year.A fifth(20%)track avoided emissions and 19%trac
62、k potential emissions within investment strategies,relatively unchanged year-on-year.A third(33%)are tracking nature and biodiversity impacts across their strategies,a sharp rise year-on-year from just a fifth(20%)in 2022.While only 19%track deforestation,this level has also risen from 13%of manager
63、s a year ago.2023 Global Asset Manager Survey9The proportion of managers tracking the carbon intensity of supply chains of their investee companies,a metric which is key to quantifying Scope 3 emissions,has remained flat at 27%year-on-year.Measuring and setting reduction targets for Scope 3 emission
64、s is crucial to ensuring that emissions targets reflect real-world impacts and emissions,particularly across companies,sectors and industries in which Scope 3 emissions might far exceed scopes 1 and 2,for example in technology or financial services.Moreover,while the recommendations of the Task Forc
65、e on Climate-related Financial Disclosures(TCFD)have not yet mandated all organizations to disclose Scope 3(e.g.,supplier and customer emissions),the International Sustainability Standards Board(ISSB)draft standards already require companies to disclose information on emissions across their value ch
66、ain,setting a clear direction of how the focus of reporting may evolve over time.Figure 3.Which,if any,climate-related metrics are you tracking within your strategies?75%74%46%36%35%33%32%31%28%27%22%20%19%19%16%Carbon intensity of investee companiesAbsolute emissionsForward looking transition metri
67、cse.g.target settingPhysical damages risksPower generation sources(utilities sector)Nature/Biodiversity impactTemperature alignmentGreen or solutions revenuesCapex associated withsustainability plansCarbon intensity of the supply chainof investee companiesClimate Value-at-RiskEmissions avoidedReserv
68、es(potential emissions)DeforestationOffsets/net contributors2023 Global Asset Manager Survey10Scope of assets committed to net-zero targets The proportion of total assets being committed to net-zero targets is fairly polarized;the majority of managers with net-zero targets have committed under 5%of
69、their total assets,while,at the other end of the spectrum,a minority have committed more than half of their total assets to their net-zero objective.Net-zero target setting is just the first step to achieving net-zero carbon emissions across investment strategies by 2050 or sooner.Managers have diff
70、erent approaches to decarbonization across portfolios measuring absolute emissions and/or carbon intensity and are developing methodologies to expand objectives beyond emissions targets.Net-zero commitments can be strengthened by expanding the proportion of total assets in scope of targets and/or by
71、 bringing the target date for achieving net-zero emissions forward.Of the 35%of managers to have set a net zero target,more than half(58%)have committed less than 5%of their total assets to their net-zero target;this proportion rises to 71%of the smallest managers with AUM of under US$2bn and 38%of
72、the largest managers with AUM in excess of US$250bn.However,among managers who have set a net-zero target,nearly a quarter(23%)have committed more than half of their assets towards their net zero targets,demonstrating a clear commitment and leadership.Relatively few managers sit between these two ex
73、tremes;only 4%have allocated 5-10%,and only 4%have allocated between 20-30%of assets towards these targets.While this could be interpreted as evidence of a void between leaders and laggards in net-zero implementation,we acknowledge that having set a target,many managers may still be relatively early
74、 in establishing and implementing their net-zero pathway.2023 Global Asset Manager Survey11iii.Expanding transition across investment strategies:biodiversity,physical risks and social impacts There is evidence to suggest that managers approach to climate transition across their strategies is evolvin
75、g towards a more holistic understanding of the different elements of the transition.Biodiversity,nature loss,physical risks and social impacts are being considered in relation to investment decision-making by an increasing proportion of managers.NatureNearly three-quarters(73%)of asset managers surv
76、eyed consider the risks and opportunities related to nature and biodiversity loss in at least some strategies that they manage.A third(33%)consider biodiversity across all of their strategies,a notable year-on-year increase.In 2022,only a fifth(20%)of managers were tracking biodiversity impacts acro
77、ss strategies.Among managers considering biodiversity and nature loss across their strategies:57%assess waste to water and water extraction in operations by portfolio companies.52%monitor the impacts of physical assets in the portfolio on areas of high biodiversity such as healthy forests,wetlands,i
78、ntact landscapes,deforestation fronts,or species-rich areas.52%assess companies with exposure to direct and indirect involvement in deforestation.A quarter(26%)assess companies for exposure to ocean degradation.Only 7%utilize carbon credits.Figure 4.Which of the below describes how you consider Natu
79、re and Biodiversity Loss risks and opportunities in the portfolios you manage?57%52%52%26%10%7%By assessing waste to water and waterextraction in operations by portfoliocompaniesBy monitoring impacts of physical assets in the portfolio on areas of high biodiversitysuch as healthy forests,wetlands,in
80、tactlandscapes,deforestation fronts orspecies-rich areasBy assessing companies for exposure toocean degradationBy assessing companies with exposureto direct and indirect involvementin deforestationBy reporting on tonnes of equivalent permillion$/EUR of revenue by portfoliocompanies as a risk(e.g.in
81、prioritysectors exposed to land use,waterstress,resource extraction,deforestation)By using carbon credits2023 Global Asset Manager Survey12Assessing physical risk in portfolios A higher proportion of managers are considering physical risks across their strategies.The physical risks of climate change
82、 across investment strategies and portfolios are greatest in scenarios where the physical assets of a company or security(in the case of commodities)are critical to financial outcomes,be it a real-estate developer or a manufacturing hub.This year,58%of managers report having assessed physical climat
83、e risk across their strategies,a significant rise from 35%in 2022.More than eight in 10(81%)of managers have either undertaken a physical risk assessment or plan to over the next 12 years,rising from 69%of managers 12 months ago.Social impact While just a small minority of managers currently run str
84、ategies with discrete social impact objectives,those that do are engaging with investee companies and policy makers on climate action,affordable and clean energy and health and wellbeing.Less than a third(31%)of asset managers currently offer investment strategies with specific social-impact objecti
85、ves tied to a measurable positive social outcome.Among those that do,the social impact focus varies widely,although the greatest proportion of managers cite climate action(72%),affordable and clean energy(66%),good health and wellbeing(64%),and gender equality(61%)as the focus of their impact object
86、ives.Some managers provided additional detail on their impact approaches,providing more granular insight on the ways in which impact approaches are developing across strategies:One manager has determined 10 broad pillars which the firm believes encapsulate“the essence of human development”and which
87、can be mapped to all investee companies.Each investee company must be contributing in a tangible way to at least one of:nutrition,healthcare and hygiene,water and sanitation,energy,housing,employment,finance,standard of living,education and/or information.Another manager described how,in one strateg
88、y,the objective is not to address every UN SDG,but to assess,through the reporting of portfolio companies,the degree to which products and services align with the SDGs.Consistent with the managers bottom-up,fundamental investment approach,the strategy identifies bespoke metrics or milestones for eac
89、h company that will help the manager monitor the companys progress toward delivering positive impact.This impact is modeled to demonstrate how each company is contributing to positive outcomes through its inputs,activities,and outputs.2023 Global Asset Manager Survey13Figure 5.Social impact objectiv
90、es targeted by investment strategies framed by the UN Sustainable Development Goals.72%66%64%61%61%57%57%54%48%43%43%33%31%25%Climate ActionAffordable and Clean EnergyGood Health and WellbeingSustainable Cities and CommunitiesGender EqualityResonsible Consumption and Production-Circular EconomyDecen
91、t Work and Economic GrowthIndustry,Innovation and InfrastructureClean Water and SanitationReduced InequalityQuality EducationZero HungerNo PovertyPeace,Justice and Strong Institutions2023 Global Asset Manager Survey14Section 2:Evolving transition in emerging and frontier markets In 2022,our global a
92、sset manager survey was precisely that global in nature assessing sustainable investment trends,commitments and plans across global strategies.This year,in order to gain a better understanding of the ways in which managers are building transition strategies across emerging and frontier markets,we fo
93、cused in on firms with current exposures across these regions.Our survey sought to examine the views of managers running strategies across emerging and frontier markets,gauging the barriers they face,the challenges they experience,and areas in which they identify opportunities to increase capital al
94、locations to markets most vulnerable to the risk of climate change,notably those across the Global South.10 i.Asset allocation across emerging markets Among managers investing in emerging or frontier markets,Asia is the most prevalent region for investment,while public equity is the most commonly in
95、vested asset class across all regions.More than eight in 10 managers(81%)are invested in listed equities,with more than eight in 10 managers reporting allocations across Africa(85%),Latin America(85%),Asia(84%)and Eastern Europe(88%).Within listed equities,nearly a quarter(23%)of managers invest in
96、emerging or frontier markets via sustainability-themed equity funds.Four in 10(40%)are invested in fixed income across emerging and frontier markets,where a greater proportion of managers invest in Africa(53%)and Eastern Europe(51%)relative to Latin America(44%)and Asia(41%).A similar trend is obser
97、vable in green/impact bonds;23%of managers invest in Africa and 22%invest in Eastern Europe via green/impact bonds,compared to 19%in Latin America.The proportion of managers investing in green and impact bonds is evidence of intentional allocation,particularly in relation to impact bonds,which are o
98、utcomes-based contracts targeting specific,measurable impacts.These investments differ significantly in structure from more standardized emerging market or sustainable exposures that investors might gain through a global fixed income fund or tracker.Figure 6.Within your Emerging and/or Frontier Mark
99、et exposure,in which asset classes have you invested?81%40%23%22%16%15%13%12%10%7%7%7%EquityFixed incomeSustainable themed equityBalanced/Multi-AssetGreen/Impact bondsHedge Funds/Absolute ReturnPrivate EquityImpact strategyCash/Money MarketInfrastructurePrivate DebtReal Estate2023 Global Asset Manag
100、er Survey15Investing in private markets,alternatives and real assets in emerging and frontier markets Despite the emerging and frontier markets focus of managers in this section of our study,the proportion of managers reporting investment in impact strategies,private markets and alternatives and rea
101、l assets remains limited.Our findings once again emphasize the reality that just a handful of specialist managers are building strategies in these asset classes across emerging and frontier regions,limiting the scope of deployment in the event of a structural shift in capital allocations to markets
102、most in need of investment.Non-specialist managers may lack the resources and/or teams on the ground in local markets to facilitate investment in sustainable infrastructure and/or private equity/debt.Just 13%of emerging market managers report current exposure to private equity;7%have exposure to inf
103、rastructure,private debt and/or real estate.Only 12%of emerging market managers have exposure to impact strategies.Given that access to listed companies and securities across the emerging and frontier markets remains more limited(many markets and/or exchanges are not liquid or in the early stage of
104、development),we believe that private markets and alternatives remain an important driver of transition investment across this heterogenous set of economies.Investing for transition across emerging and frontier markets supports critical economic and social development,from the delivery of renewable e
105、nergy sources and improvements in energy efficiency,to the enhancement of economic infrastructure and resilience to the effects of global warming.2023 Global Asset Manager Survey16ii.Expectations around capital flows and views on persistent barriers Managers expect asset owner appetite for emerging
106、market allocations to increase,although concerns around transparency may continue to limit investment volumes into emerging and frontier markets.That said,manager confidence in the outlook for capital flows to emerging and frontier regions has strengthened meaningfully over the past year.In 2022,jus
107、t a small minority of global asset managers anticipated a meaningful increase in asset owners exposure to emerging and frontier markets in the near future;26%took the view that an increase would take place over the next two years.On a 35-year view,nearly half of managers(45%)expected allocations to
108、emerging markets to increase significantly.This year,nearly nine in 10(87%)emerging markets managers believe asset owners will meaningfully increase their exposure to emerging and frontier markets within the next five years.37%expect a meaningful increase in allocation in the next 24 months,while 45
109、%anticipate an uptick over the next 3-5 years.Only 13%do not expect a meaningful increase in allocations in the near future.Preconceptions around the challenges of investing in emerging and frontier markets may bring the challenges of currency risk,political instability and lack of liquidity front o
110、f mind.However,a lack of transparency and disclosure around both company reporting and ESG factors are viewed to be the most significant barriers to increased allocations to emerging and frontier markets,reinforcing the view shared by global managers in our 2022 survey.Figure 7.Do you believe that a
111、sset owners will meaningfully increase their exposure to Emerging and/or Frontier markets in the near future?Yes,over the next 1-2 yearsYes,imminentlyYes,over the next 3-5 yearsNot for the foreseeable future0%10%20%30%40%50%5%37%45%13%4%43%40%14%5%35%45%15%13%6%36%46%4%40%42%15%OverallAfricaLatin Am
112、ericaAsiaEastern EuropeIn Africa,for example,barriers to capital allocations both real and perceived center around political instability,conflict and corruption,climate change,aging infrastructure and technology,inconsistent policy and regulation and economic volatility11,any or all of which can be
113、red flags to potential capital allocators.However,when research was undertaken to unpack the case for investing in particular African economies,in sustainable infrastructure for example,studies showed that while major risks exist,there is little systematic evidence available to suggest that there is
114、 significant difference between the actual default rates of projects in Africa and other regions of the world.12 We see opportunity for a new framework to support a more fundamental reassessment of risk perception and assessment across Africa and other emerging market regions.2023 Global Asset Manag
115、er Survey17When asked to consider the most significant barriers to accelerating capital allocations across emerging markets regions:Managers view insufficient transparency and disclosure on company ESG factors(78%)and company financial reporting(77%)as the most significant impediments to internation
116、al investors allocating to equities,bonds or real assets in emerging and frontier markets.70%of managers cite regulatory inhibitors,particularly for investors based in OECD markets,as a barrier.54%identified insufficient transparency on deal counterparties and other investors in emerging market asse
117、ts or projects,including,for example,having adequate visibility on creditors and associated terms.Insufficient transparency even perceived creates nuanced challenges for both sides of investments in emerging markets;in some cases,these concerns may prevent otherwise investable deals from progressing
118、 to development.Improving transparency,changing risk perception and enhancing connectivity between deal sponsors and institutional investors is therefore crucial to overcoming reservations and getting an increased number of projects off the ground.2023 Global Asset Manager Survey18The scale of inves
119、table projects and the scope of existing financing structures are also viewed as hindering allocations to emerging and frontier markets.Deal sponsors in emerging and frontier markets and those primarily serving underserved populations in developed markets frequently lack networks and visibility with
120、 international investors and other capital providers.This can Managers views on increasing capital allocations across emerging marketsmake it more challenging to source investment capital,even for otherwise investable projects.This years findings further reinforce the challenges of risk perception a
121、nd lack of transparency to increasing capital allocations and scaling projects in emerging markets.42%think most investment opportunities in these markets are too subscale for institutional investment.26%regard a lack of blended finance vehicles as a barrier to facilitating investment in emerging an
122、d frontier regions.Managers also shared their views on the key drivers and goals in relation to unlocking greater levels of capital commitments across emerging markets:Improved market infrastructure:Inefficient trading systems,inadequate clearing and settlement mechanisms,and limited access to elect
123、ronic trading are an impediment.Improvements in these areas can reduce transaction costs and operational risks.Stronger regulatory frameworks will improve confidence in international investors.Better corporate governance,including having independent boards,transparent accounting and disclosure stand
124、ards,and protection of minority shareholders rights.Enhanced liquidity:Liquid markets are essential for large institutional investors.Efforts should be made to improve market depth and reduce bid-ask spreads.Initiatives like creating market makers or incentivizing institutional participation can hel
125、p boost liquidity.Accessible and relevant data:For systematic managers,reliable and comprehensive data are crucial.Many emerging and frontier markets lack quality data,making it challenging to build and test quantitative strategies.Better data sources and vendors can pave the way for more systematic
126、 investments.Openness to foreign investment:Some emerging and frontier markets have restrictions on foreign ownership,capital controls or taxes that deter international investment.Diversification of listed companies:A more diversified set of industries and sectors represented on local stock exchange
127、s can make these markets more attractive and reduce concentration risk.Benchmark inclusion:Inclusion of frontier and emerging markets in major global indexes can significantly increase their visibility and attract passive inflows.2023 Global Asset Manager Survey19Concerns around the impact of presen
128、t and future physical climate risks are also prominent among emerging market managers,alongside a lack of research.59%of managers view current physical climate impacts as a barrier to increased allocations,although only 9%believe that this factor is a“significant”barrier.Similarly,57%are concerned o
129、ver the prospect of increasing physical climate risks,but this drops to 5%of those who see this risk as“significant”.52%note concerns around a lack of sustainability research and ratings in emerging and frontier markets,with 14%citing this as a“significant”concern.42%cite lack of equity and/or bonds
130、 research and ratings in emerging and frontier markets as an obstacle.Figure 8.To what extent do the following factors present barriers to international investors allocating to equities,bonds or real assets in Emerging and Frontier markets?78%77%70%70%59%57%55%54%52%52%42%42%40%38%37%28%26%Insuffici
131、ent transparency anddisclosure on company ESG factorsInsufficient transparency and disclosureon company financial reportingRegulatory inhibitors(e.g.for OECD investors)Risk of modern slavery,child labor,health and safety and related issuesConcern about physical climate impactsConcern about increasin
132、gphysical climate impactsGaps in financing(e.g.access to seedcapital,refinancing,municipal bonds)Insufficient transparency on the other investorsin the company or project e.g.,adequatevisibility around other creditors and their termsInsufficient number of trustedproject sponsors,contractorsA lack of
133、 sustainability research andratings in emerging and frontier marketsInvestment opportunities are too subscale forinstitutional investmentA lack of equity/bonds research and ratings inemerging and frontier marketsInsufficient adequate first loss mechanisms(e.g.for infrastructure investing)Limited num
134、ber of investment opportunities/pipeline of institutional investment opportunitiesLimited number of investment opportunitiesexplicitly linked to sustainable development(UN Sustainable Development Goals)An investment organization not having a physicalpresence in the emerging markets in which it inves
135、tsLack of blended finance investment vehicles tofacilitate investment2023 Global Asset Manager Survey20Looking ahead to the potential drivers of increased allocations across emerging and frontier markets,managers believe that increased adherence to globally recognized sustainable reporting framework
136、s could help to offset residual transparency concerns.In light of managers focus on a lack of transparency and disclosure on company ESG factors and financial reporting,it follows that nearly two thirds(63%)of managers view adherence by local issuers and operators to globally recognized sustainable
137、reporting frameworks,such as TCFD,as the most impactful driver of increased sustainable investment across emerging and frontier markets.That said,the prominence of this factor as a barrier has diminished over the past 12 months,having been cited by nine in 10 managers(89%)in 2022.Notwithstanding con
138、cerns on transparency,emerging markets managers identified areas in which they feel disclosures and data have improved across emerging and frontier regions over the past year:More than half(53%)of emerging market managers think that the disclosures and data on absolute emissions available across eme
139、rging and frontier markets have become more robust in the past year.The same proportion(53%)of managers think that the disclosures and data on the carbon intensity of investee companies available in emerging and frontier markets have improved through the course of 2023.More than two-fifths(44%)of ma
140、nagers think that the disclosures and data on forward-looking transition metrics available in emerging and frontier markets have become more robust in the past year.Managers noted that they had witnessed the least improvement in data regarding“emissions avoided,”“reserves(potential emissions)”and“of
141、fsets/net contributors”.However,it is worth acknowledging that,in some cases,this may not be an indication of poor quality or inaccuracy,and rather that the reliability of certain data and disclosures has remained consistently strong over the past year.2023 Global Asset Manager Survey21The following
142、 table illustrates managers views on areas in which the robustness of data has improved over the past 12 months.It is interesting to consider the areas in which managers do not deem that progress has been made,namely,in measures of climate value-at-risk(a forward-looking and return-based measure of
143、climate related risks and opportunities in portfolios);emissions avoided;alongside data on emissions offsets or net contributors.Under an expanded definition of transition investing,these data points may serve as valuable inputs to building a more holistic understanding of risk and return across eme
144、rging and frontier market contexts.Last year,we identified the potential emergence of a two-tier system around expectations of data gathering and disclosure in emerging relative to developing markets.We observed that uniform frameworks for sustainable reporting and disclosure are still evolving acro
145、ss developed markets.While asset managers would like to see practices and frameworks in emerging markets converge towards those prevalent in developed markets,this is challenging as those practices are effectively still a moving target.Acknowledging that markets and reporting frameworks are imperfec
146、t systems in which progress arises through clear commitments and refinement over time,we see opportunity to build a broader understanding of transition across both emerging and developed markets,by drawing on a broader set of inputs,to assess transition impacts and progress beyond linear measurement
147、s of carbon reduction across portfolios.Figure 9.Percentage of managers who believe the following disclosures and data available in emerging and frontier markets have become more robust in the past 12 months.53%53%44%37%35%31%30%28%26%23%20%18%18%17%15%Absolute emissionsCarbon intensity ofinvestee c
148、ompaniesForward looking transition metricse.g.target settingGreen or solutions revenuesPower generation sources(utilities sector)Capex associated with sustainability plansDeforestationBiodiversity impactPhysical damages risksCarbon intensity of the supply chainof investee companiesTemperature alignm
149、entClimate VAREmissions avoidedReserves(potential emissions)Offsets/net contributors2023 Global Asset Manager Survey22If more investment opportunities were available in emerging and frontier markets:42%of emerging market managers would favor publicly listed companies with an emerging or frontier foo
150、tprint,but specify a preference for those listed in OECD markets.31%of emerging market managers would favor publicly listed companies with emerging and frontier footprints but specify a preference for those listed on local exchanges.Only 7%would favor privately held companies with an emerging or fro
151、ntier footprint with specific asset profiles for example solar electricity generation.Only 4%would favor privately held companies with specific geographic profiles,e.g.single-country or pan-regional.We found it striking that emerging market managers would not opt to pursue investment opportunities v
152、ia public-private partnerships,or through blended finance infrastructure projects,if they became more readily available.Managers evidence their clear preference for listed equities via OECD listings,perhaps indicative of the more specialist nature and focus of local listings and/or private markets a
153、llocations.In these asset classes,we observe outsized benefits of working with trusted local partners with strong networks on the ground and of increased connectivity between deal sponsors and institutional investors.2023 Global Asset Manager Survey23iii.Incorporating biodiversity risks and social i
154、mpact outcomes across emerging and frontier market strategies Managers in emerging and frontier market strategies are more likely to consider risks and opportunities pertaining to biodiversity loss relative to peers across global strategies.A third(33%)of managers across all global managers we surve
155、yed consider biodiversity loss and risks across their strategies.Of these managers,those investing in emerging markets demonstrate a relatively higher propensity to consider these issues.Four fifths(79%)of emerging market managers consider biodiversity related risks and opportunities across their st
156、rategies.Biodiversity considerations are most prominent in equity investment,with 79%of emerging and frontier market managers saying they consider this risk in this asset class.Consideration of biodiversity impacts by emerging markets managers is much less common across other asset classes.Less than
157、 a fifth(18%)consider biodiversity risks and opportunities within impact funds,and only 7%consider it within agriculture and timberland investments.Around one in 10 considers these risks within private market investments in emerging and frontier regions.Among those considering social-impact objectiv
158、es,the majority(84%)consider the social impacts of companies in emerging and frontier markets as an element of their investment decision making.Figure 10.In which asset classes in Emerging and Frontier Markets do you consider Nature and Biodiversity Loss risks and opportunities?79%36%18%11%10%8%7%7%
159、7%7%EquitySustainable themed equityImpact strategyPrivate equityPrivate debtInfrastructureSustainable infrastructureReal estateAgricultureTimberland2023 Global Asset Manager Survey24By taking stock of progress across global investment strategies,Mercer sought to understand how transition investing a
160、nd climate action is evolving across portfolios.This years survey findings evidence the ways in which global asset managers particularly those specializing in emerging markets are advancing their approaches,but also highlighted the significant work ahead to commit a greater proportion of assets to n
161、et-zero aligned pathways.Our survey indicates that the allocation of total assets to net-zero strategies remains low.Of the 35%of managers to have set net-zero targets,58%have allocated less than 5%of their total assets.However,nearly a quarter of managers to have set a net-zero target have committe
162、d more than half of their assets towards their net-zero targets,demonstrating a clear commitment and leadership.While it is the scope of assets committed that will ultimately determine the momentum behind transition in institutional portfolios,the policy backdrop is moving fast,and research shows ma
163、nagers have taken major strides forward in expanding the scope of their objectives.80%of managers now incorporate fair labour practices,health and safety and human rights within their investment policies,a significant rise from 64%last year;72%have policies which explicitly reference climate adaptio
164、n or physical resilience;and 49%have policies which address how biodiversity considerations are factored into their strategies.COP28 is focused on mobilizing finance to help close the gap between developed and emerging and frontier markets.This years findings further reinforce the challenges of risk
165、 perception and lack of transparency to closing this gap and increasing capital allocations and scaling projects in emerging markets.81%of emerging market managers are invested in listed equities,yet just 13%report current exposure to private equity;7%have exposure to infrastructure,private debt and
166、/or real estate.Only 12%of emerging market managers have exposure to impact strategies.42%think most investment opportunities in these markets are too subscale for institutional investment.Managers view insufficient transparency and disclosure on company ESG factors(78%)and company financial reporti
167、ng(77%)as the most significant impediments to international investors allocating to equities,bonds or real assets in emerging and frontier markets.Risks,real and perceived,continue to be a barrier to facilitating capital flows critical to sustainable development and accelerating transition goals acr
168、oss economies most vulnerable to the risks of climate change.Investment approaches in these markets remain largely conservative,with strategies concentrated in listed equities.Mercer and partner research shows that the case for investing in particular African economies,for example,is negatively impa
169、cted by risk perception.Allocations to much needed sustainable infrastructure is seen to carry too high a risk,yet there is little systematic evidence available to suggest that there is significant difference between the actual default rates of projects in Africa and other regions of the world.13 In
170、creased transparency of both investable projects and deal sponsors is key to accelerating institutional capital into climate positive investments across a broader range of asset classes.At COP28,investors and policymakers alike may advance a broader,holistic approach to transition,expanding investme
171、nt approaches from linear carbon reduction to address nature loss,physical risks and adaptation,engage in a circular economy and support principles of equality for sustainable development.Conclusion2023 Global Asset Manager Survey251 United Nations Climate Change.“Global Stocktake,”available at http
172、s:/unfccc.int/topics/global-stocktake.2 United Nations Principles for Responsible Investment.“Just transition,”available at www.unpri.org/sustainability-issues/environmental-social-and-governance-issues/social-issues/just-transition.3 Task Force on Climate Related Financial Disclosures,available at
173、https:/fsb-tcfd.org.4 United Nations.“The 17 goals,”available at https:/sdgs.un.org/goals.5 UN Environment Programme.“Kunming-Montreal Global Biodiversity Framework,”2022,available at www.unep.org/resources/kunming-montreal-global-biodiversity-framework.6 BloombergNEF.(2023).The Biodiversity Finance
174、 Factbook.A report published by BloombergNEF.7 Mercers 2024 Large Asset owner Barometer,accessed at:https:/ United Nations,Committee for Development Policy:https:/www.un.org/development/desa/dpad/wp-content/uploads/sites/45/CDP-excerpt-2023-1.pdf9 UN Principles for Responsible Investment.“What are t
175、he Principles for Responsible Investment?”available at www.unpri.org/about-us/what-are-the-principles-for-responsible-investment.10 The Global South broadly comprises developing economies in Africa,Latin America and the Caribbean;Asia(excluding Israel,Japan and South Korea);and Oceania(excluding Aus
176、tralia and New Zealand).11 United Nations Environment Programme.Africa Environment Outlook for Business,2023,available at https:/wedocs.unep.org/handle/20.500.11822/43127;jsessionid=46B6C14DC55D6903AE43E5D859D95BDA.12 Mercer.Infrastructure financing in subSaharan Africa:Opportunities and impacts for
177、 institutional investors,2021,available at https:/ P 12 Examining Infrastructure as an Asset Class By Kevin Kelhoffer(Sept 2021) and financing in sub-Saharan Africa Opportunities and impacts for institutional investors Mercer,Mida Advisors,Standard Bank(Sept 2021)End notesReferences to Mercer shall
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