Ludovic Theau

A leading ethical fund manager, Australian Ethical, has announced the expansion of its private markets offering with the launch of its Australian Ethical Growth Opportunities Fund providing institutional grade ethical private markets investment to wholesale investors.

Australian Ethical’s Growth Opportunities Fund has received Australian Government backing via the Clean Energy Finance Corporation (CEFC) with a cornerstone commitment up to $125 million, alongside a $500 million seed investment from Australian Ethical.

The Fund provides wholesale investors access to an institutional grade, scalable, diversified portfolio of private markets investments designed to deliver both market rate returns and measurable impact. It is an open-ended fund that blends investments alongside like-minded institutional capital, delivering purposeful, long-term exposure to unlisted real assets.

It follows five key thematics: decarbonisation, digitalisation, urbanisation, circular economy and changing demographics, and employs impact measurement to assess the net benefit of each investment. Initial investments include recycling infrastructure, renewable energy and battery storage, renewable data centres, and aged care facilities.

In addition, every investment is aligned to Australian Ethical’s Ethical Charter, which guides how capital is allocated to create positive outcomes while avoiding unnecessary harm to people, planet and animals.

Australian Ethical Chief Investment Officer Ludovic Theau said: “The biggest opportunity to capitalise on and support Australia’s net zero transition is in private markets. We’re leveraging our expertise, capability and networks to partner with some of the best specialists and managers to democratise access to these opportunities for wholesale channels, and we’re co-investing capital to take advantage of and support these opportunities together.

“We’re pleased to receive the support of the Australian Government through the partnership with the CEFC on this Fund. With the road to net-zero before us, this Fund allows investors to capitalise on the long-term growth opportunity this presents and feel good about where their money is invested.”

According to a McKinsey report for the Business Council of Australia, a 2035 climate target north of 60 per cent will require more than $400 billion in new capital investment from government and industry.

CEFC Executive Director, Heechung Sung said: “This investment demonstrates how the CEFC can use its existing assets to help catalyse new market offerings and support the next phase of growth for sustainable finance.

“By backing a new institutional vehicle with CEFC investments, we are helping to establish a scalable platform for climate-focused assets, crowding in capital and expanding the reach of sustainable finance to a broader audience to accelerate Australia’s decarbonisation.”

Australian Ethical’s Head of Private Markets Adam Roberts said: “Australian Ethical’s Growth Opportunities Fund gives wholesale investors access to a wide range of impactful private investments providing immediate diversity without having to commit and tie-up large amounts of capital in a single private equity or venture capital investment.

“Drawing on two decades of impact investing experience, we apply institutional rigour and active industry engagement to identify solutions to global challenges. We invest where we see enduring tailwinds and the potential for attractive long-term, risk adjusted returns.”

The Fund has an Impact Advisory Forum that is separate to the Fund’s investment team, who review and monitor the impact reporting across the portfolio. It aims to deliver 11-13% per annum (after fees and expenses) over 7-year periods whilst providing quarterly liquidity.

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Deirdre Cooper

Sentiment towards decarbonisation has weakened in recent years, but underlying earnings performance has remained resilient. High-quality enablers of the energy transition have continued to deliver strong, above-market earnings growth, even as valuations compressed amid policy uncertainty and higher interest rates — creating what investors see as a compelling entry point.

“Sentiment may have faltered over the past few years, but earnings have not,” said Deirdre Cooper, Head of Sustainable Equity. “High-quality enablers of decarbonisation have continued to deliver strong, above-market earnings growth, even as valuations compressed amid policy uncertainty and higher interest rates.”

Recent months have seen a recovery across clean-tech markets. While some lower-quality companies may simply be rebounding from oversold levels, others are demonstrating a more durable path to long-term value creation. Improving sentiment has been driven by structurally rising power demand in developed markets — particularly from data centres and industrial electrification — alongside accelerating, cost-driven adoption of clean technologies in emerging markets.

“What we saw in 2025 was an energy transition increasingly driven by economics, technology and efficiency gains, rather than policy cycles,” Cooper said. “We expect this shift to continue this year and beyond, with the clean-tech market projected to triple in value to >US$2.1 trillion by 2035.”

An accelerating transition with new growth engines

The energy transition continues to advance, but its drivers are evolving. Emerging markets are now a central force, with clean technology reaching cost parity — or better — with fossil alternatives across much of the developing world.

“The energy transition is still on, and it is accelerating in new ways,” said Cooper. “Emerging markets have become the growth engine of the transition.”

China’s scale and cost leadership in solar, wind, batteries and electric vehicles is reshaping global adoption patterns, enabling countries to electrify and industrialise more cleanly and affordably. Nearly half of China’s clean-tech exports now go to emerging economies, accelerating deployment across markets such as India, Thailand and Brazil.

Cooper continued: “Emerging markets are transitioning not primarily due to policy, but because clean technology makes economic sense.  China’s scale and cost leadership in solar, wind, batteries and electric vehicles are transforming access to affordable clean energy across the developing world.”

Developed markets face rising power demand and efficiency needs

In parallel, developed markets are experiencing a sharp inflection in electricity demand after decades of flat consumption. Artificial intelligence, data centres, electrified heating and cooling, and industrial reshoring are driving a renewed focus on power generation, grids and efficiency.

Cooper continued: “This has turned utilities, grid operators and efficiency specialists into some of the most important enablers of the next economic growth wave. From Amazon to Coreweave, investors in AI datacentres are increasingly calling out access to power as the key bottleneck to delivering on their plans.”  This combination of rising demand and decarbonisation goals is creating significant opportunities for utilities, grid operators and companies enabling energy and industrial efficiency.

“With policy headwinds fading and fundamentals strengthening, we think developed-market clean-tech leaders have potential for a more sustained phase of growth than the broader market appears to believe as part of an all-of-the-above energy solution,” Cooper stated.

Technology expands the investable opportunity set

Advances in electrification and efficiency are broadening the scope of decarbonisation across the global economy. Today, more than 75% of final energy demand can be electrified, up from around 50% in 2000, creating new opportunities across industrial electrification, power semiconductors and energy-efficient infrastructure.  Cooper noted: “Efficiency is a critical lever both for reducing emissions and enabling new sources of power demand like data centres in an increasingly electricity short world. This creates opportunities for companies whose technologies enable smarter, cleaner and more efficient use of energy across industries.”

Beyond power and industry, innovation is also unlocking differentiated opportunities in areas such as precision agriculture, where targeted solutions can address emissions from food systems, which account for around 30% of global emissions.

Positioning for the next phase of the transition

Portfolio positioning reflects this evolving landscape, balancing defensive exposure with structural growth opportunities while increasing emphasis on emerging markets.  “Our focus remains on identifying companies with structural growth, durable competitive advantages and the ability to compound returns through cycles,” Cooper said. “The portfolio is balanced between defensive utilities that meet surging power demand in developed markets, and high-growth enablers of electrification, resource efficiency and indu

After a period where sentiment diverged sharply from fundamentals, markets may now be turning in favour of active investors.  “The ‘transition of the energy transition’ — from developed to emerging, and from policy to technology and economics — is creating new opportunities for high-quality decarbonisation solution providers,” Cooper concluded.

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Mano Mohankumar

Another strong calendar year result for super fund members

Super funds posted another strong result for the 2025 calendar year, with the median growth fund (61–80 per cent in growth assets) returning 9.3 per cent. This follows impressive gains of 9.9 per cent in 2023 and 11.4 per cent in 2024, translating to nearly 35 per cent growth over the past three years. Super fund members invested in higher-risk portfolios enjoyed even stronger outcomes.

Chant West senior investment research manager, Mano Mohankumar, says international share markets were the key driver of 2025’s strong performance, delivering 18.6 per cent on a currency-hedged basis, despite uncertainty around tariffs and geopolitical tensions.

“International shares in unhedged terms was lower, with a 12.5 per cent return due to the appreciation of the Australian dollar over the year (up from US$0.62 to US$0.67). On average, growth funds have 31 per cent in total invested in international shares and 25 per cent allocated to Australian shares, with Australian shares also contributing meaningfully, returning 10.7 per cent. It also helped that all major asset classes generated positive returns over the period.

“We’re still in the process of collecting final returns for unlisted asset classes such as unlisted property, unlisted infrastructure and private equity, all of which were in positive territory. We estimate that unlisted infrastructure finished with gains in the 7 per cent to 10 per cent range, with private equity likely to finish with a low double-digit return. Unlisted property, which was in the red in each of the two previous years, is expected to finish with a positive return in the 3 per cent to 6 per cent range. Listed real assets were also up, with Australian listed property returning 9.7 per cent, while international listed property and international listed infrastructure yielded gains of 7.5 per cent and 11.6 per cent, respectively. Within the traditional defensive asset classes, cash, Australian bonds and international bonds returned 4 per cent, 3.2 per cent and 4.4 per cent, respectively.

“With share markets performing so well in 2025, particularly international shares, naturally the better performing super funds generally had higher allocations to those asset classes. Funds that had lower allocations to unlisted property, cash and bonds would have also benefitted, as did those with lower exposure to the US dollar,” said Mohankumar.

Chart 1 shows the top 10 performing growth options over the 2025 calendar year, together with the survey median, noting that long-term performance is more important for super fund members.

Table 1 compares the median performance for each of the traditional diversified risk categories in Chant West’s Super Fund Performance Survey, ranging from All Growth to Conservative. Over the long term, all risk categories have met their typical return objectives, which range from CPI + 1.5% for Conservative funds to CPI + 4.25% for All Growth.

Chart 2 shows the top 10 performing growth options over 10 years, together with the survey median.

Funds continue to beat risk and return targets

While much of the focus at this time of year is on calendar year performance, Mohankumar believes fund members always need to think long term. To provide further context, Chart 3 plots the year-by-year performance of the median growth fund over the full 33 calendar years since the introduction of compulsory super in July 1992. It shows that super funds have delivered on their risk and return objectives over the long term.

Mohankumar says that while super funds had a strong 2025 with a median return of 9.3 per cent, that level of return shouldn’t be thought of as normal.

“The typical long-term return objective for growth funds is to beat inflation by 3.5 per cent a year, which translates to just over 6 per cent a year. Since the introduction of compulsory super, the annualised return is 8 per cent and the annual CPI increase is 2.7 per cent, giving a real return of 5.3 per cent a year – well above that 3.5 per cent target. Even looking at the past 20 years, which includes three major share market downturns – the GFC in 2007-2009, COVID-19 in 2020 and the high inflation and rising interest rates in 2022 – super funds have returned 6.9 per cent a year, which is still comfortably ahead of the typical objective.

“Returns are important but so is risk, and most funds also set themselves a risk objective. Risk is normally expressed as the likelihood of a negative annual return, and typically a growth fund would aim to post no more than one negative return in five years on average. This objective would translate to no more than six negative years over the 33 calendar years shown. As it turns out, there have only been five, so the risk objective has been met as well as the performance objective.”

Chart 4 shows that for most of the time since compulsory super, the median growth fund has exceeded its return objective over rolling 10-year periods, which is a commonly used timeframe consistent with the long-term focus of super. The exceptions are two periods between mid-2008 and late-2017, when it fell behind. This is because of the devastating impact of the 16-month GFC period (end-October 2007 to end-February 2009) during which growth funds lost about 26% on average.

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Elodie Laugel

Amundi, Europe’s leading asset manager^[1] has shared its Responsible Investment Views for 2026 setting out how geopolitical realignments and accelerating climate and technology trends will reshape investment priorities and allocations for the year ahead.

In 2025, fixed income led a normalisation in responsible investment and equity demand shifted from restrictive screens toward low‑tracking‑error approaches. The recalibration of climate coalitions intensified stewardship and corporate focus on adaptation has risen.

Elodie Laugel, Chief Responsible Investment Officer stated: “Responsible investment is moving from aspiration to execution. Expectations for stewardship, especially in Europe, continue to intensify. There is a growing emphasis on directing capital toward climate solutions that deliver measurable, real‑world impact. In 2026, the focus will extend beyond transition plans to core issues of resilience and natural‑capital preservation. As physical risks rise and energy systems transform at unprecedented speed, what will set leaders apart is not ambition, but the ability to act – decisively and at scale – to secure strategic autonomy and lasting financial resilience.”

Amundi highlights six convictions for 2026:

1. The clean‑energy bottleneck has shifted from capacity additions to system integration

Global electricity demand is accelerating, IEA expects 4% growth through 2027, adding 3,500 TWh, with >90% of this growth coming from renewables. The carbon intensity of listed companies fell by roughly 8% year-on-year globally, leaving the inflection point for peak energy related emissions uncertain. As renewables are increasingly cost-competitive, the binding constraint is now grids, flexibility, storage and faster connection that need to be facilitated by policies (permitting, connection queues, market rules). For investors, end user affordability is an increasingly material factor to monitor, since integration failures or regulatory delays can raise bills and slow adoption.

2. Strategic-autonomy efforts are fragmenting the energy landscape

Governments are reshoring critical supply chains, from clean-tech and critical minerals to parts of the fossil value chain, to boost resilience. Europe prioritizes speed: rapidly expand grids, flexibility and domestic clean-tech or face higher costs and lower autonomy. The US uses incentives and localization but sends mixed signals: load growth from AI and electrification drives capacity needs, while volatile gas/LNG markets and export-driven infrastructure risk price pressure and lock in. Asia, led by China, already dominates cleantech manufacturing; for many Asian countries the case for a sustainable energy transition is clear and offers climate resilience, energy independence and economic opportunity.

3. Climate adaptation is now an imperative for investors, and on an equal footing with transition

Investors are prioritizing adaptation as climate impacts mount, and 60% of corporates expect significant financial impacts from physical risks in the next five years 8. To better manage risks while pursuing decarbonization goals, investors must embed climate-risk analysis, including supply chain exposures, into due diligence and asset allocation, and prioritize development of localised, asset level, tail risk adaptation metrics, which are still underdeveloped.

4. Natural capital is the new responsible investment darling, for good reasons

Global nature finance totals $200bn annually but must triple by 2030. Private capital, currently just 18% of flows, is critical to scaling investment9. The most direct path for investors lies in real assets like forests, farmland, and water rights, which deliver returns through sustainable use (carbon credits, timber, agriculture) and are increasingly integrated into advanced portfolios. To accelerate growth, financial instruments like green bonds, debt-for-nature swaps, and impact bonds can channel additional capital into these assets. Both channels can offer compelling risk-adjusted returns with impact.

5. AI is redefining responsible investing, from data to labor markets

AI is improving sustainability analysis, speeding data ingestion and adding new qualitative insights, but also risks widening social gaps and workforce disruption, especially in ageing exposed sectors. Opportunities are likely to be found in integrated health/care platforms, robotics/automation for labor scarce services, and age inclusive digital infrastructure. 2026 will also crystallize AI regulatory fault lines, such as ethics and regional divergence, forcing investors to shift capital toward socially and economically useful use cases.

6. 2026: A window to align responsible investment products with investor preferences

Strong stated retail demand, particularly from younger investors, is being held back by advisory frictions, unclear product labels and complex disclosure. In Europe, 2026 could be a turning point: SFDR 2.0 combined with technical alignment of MiFID II and IDD, can simplify labels and lower advisory complexity to unlock retail participation, provided product categorisations deliver a genuine product market fit.

Read the report.

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Notes:
[1] No 1 European asset manager based on global assets under management (AUM) and the main headquarters being based in Europe Source: IPE “Top 500 Asset Managers” published in June 2024, based on assets under management as at 31/12/2023

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Despite the proliferation of biodiversity impact assessment metrics and tools for investors, there is currently no industry standard or formal guidance for selecting between or applying these tools.

Franklin Templeton has released an independent review of existing biodiversity impact assessment tools, conducted in partnership with the Melbourne Biodiversity Institute, University of Melbourne.

Despite the proliferation of biodiversity impact assessment metrics and tools for investors, there is currently no industry standard or formal guidance for selecting between or applying these tools. Titled Making money talk nicely: Biodiversity impact assessment for investors, the paper evaluated eight leading tools^[1] tailored for financial institutions to examine the practical value of these metrics for investment decision-making, and to assess their capacity to meaningfully represent real-world biodiversity impacts. Below are key highlights from the paper:

Limitations of biodiversity impact assessment tools:

• The research found low overall agreement among tool outputs when assessing biodiversity impacts for companies in the S&P 500.
• When determining which ten companies in the S&P 500 had the greatest impact on nature, the tools did not agree on the ten most impactful firms, let alone their rank order.
• This was further compounded by a general lack of transparency in the methodologies used, providing limited opportunity for reproducibility, making it difficult to independently verify the reasons behind variations in results.
• Despite drawing on many publicly available datasets, methods are generally proprietary, hindering the capacity for peer review, independent validation, and sector-wide improvement.
• Unlike greenhouse gas emissions and impacts on climate, biodiversity is multi-dimensional and location specific. Tools generally lack sufficient spatial mapping of the direct operations and supply chains of companies needed to confidently quantify the biodiversity impacts of companies.
• Many tools rely on Life Cycle Impact Assessment (LCIA) methods to translate environmental pressures into expected reductions in species diversity and abundance, but these methods often rely on overly simplified cause-effect pathways and are not adequately spatially resolved to assess the impact of specific companies.

Pathways for improvement:

• There is an urgent need for increased transparency, reproducibility, peer-review, and standardisation of tool methodologies.
• Eventually, a finance sector standard and certification of biodiversity impact assessment tools is warranted.
• While gaining access to spatially mapped business activity data will remain challenging, there is a role for the International Sustainability Standards Board to set disclosure standards.
• A detailed, up-close analysis of firm-level risks and opportunities remains the most reliable approach, incorporating multiple dimensions such as company specific spatial data and mitigation efforts where available. Ideally, this approach should be supported by guidance from independent nature experts.

Implications for asset managers:

• There is currently limited ability to determine which tool provides the most accurate or “true” assessment because there has been no evidence of rigorous peer review of methodologies or skill-testing, in the way that climate models are tested by the scientific community.
• Substantial discrepancies between tools means that use of any individual tool to support investment decisions comes with  uncertainty.  Reliance on any single tool may lead to investment decisions that fail to adequately mitigate nature-related impacts and risks, or to appropriately reflect investor preferences.
• A holistic approach is recommended, making use of the various types of data that are available, ideally augmented with company-specific investigations, rather than relying on a single metric.

Jennifer Willetts, Head of Investment Sustainability Solutions, Franklin Templeton, commented: “Protecting biodiversity is fundamental to sustainable growth. We are proud to partner with the University of Melbourne to raise awareness on the limitations of current biodiversity impact assessment tools offered to the asset management industry. We hope this research highlights the potential risks associated with using a single metric to drive decision making or make claims about the biodiversity impact of a product. Our review uncovers that many of the existing tools lack the transparency and spatial precision required to effectively support investment decisions.”

She added, “Asset managers can play a pivotal role in shaping a financial system that consistently assesses biodiversity-related risks and impacts. By embedding biodiversity considerations into investment processes, we can better manage risks and opportunities, whilst building potential to help drive nature-positive outcomes. At Franklin Templeton, our Investment Sustainability Solutions Team is committed to equipping our investment teams with the insights and tools needed to navigate evolving sustainability priorities.”

“The analyses we were able to do with Franklin Templeton highlights the need for caution in utilising off-the-shelf tools and datasets for understanding companies’ impacts on nature. These findings also present an enormous opportunity for leadership towards nature-positive growth with integrity in the sector. Nature, finance and business experts now have the data available to understand why they need to work together to build scientifically credible, and ideally peer-reviewed tools, datasets and processes for understanding nature impacts of companies at high spatial resolution” said Brendan Wintle, Director of the Melbourne Biodiversity Institute, University of Melbourne.

Read the report.

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Notes:
[1] This research project assessed eight prominent biodiversity impact assessment tools tailored for financial institutions: Fair Supply, Global Impact Database, GIST Impact, Iceberg Data Lab, Carbon4Finance Biodiversity Impact Analytics powered by the Global Biodiversity Score (BIA-GBS), MSCI ESG Manager, Nature Alpha, and S&P Global Sustainable.

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John Livanas

State Super, one of Australia’s largest and most trusted superannuation schemes, has acquired a 23% equity stake in Frontier Advisors, a leading institutional investment advisory firm.

This strategic partnership includes a seat for State Super on Frontier’s board, aligning the NSW public sector superannuation fund with other major shareholders – AustralianSuper, Hesta, Cbus and First Super. In an industry first, this acquisition will also facilitate the movement of State Super’s dedicated investment team inside Frontier to create a new Independent Chief Investment Officer, or ‘ICIO’ service, to best support members.

State Super CEO John Livanas said the collaboration between State Super and Frontier will provide members with continuity and security by retaining access to the technical skills of the specialist team already managing their funds.

“We have a great team of professionals managing our portfolio, and as State Super enters into a new transition phase, we’ve devised a solution to retain this valuable investment team so members who’ve entrusted their retirement savings to us receive a continuity of service,” Mr Livanas said.

This inventive solution will deliver greater opportunity for career growth and professional development for State Super’s dedicated investment team, ensuring continuity for staff and allowing the team to remain focused on doing what they do best, delivering great outcomes for members.

“For the Fund, it will be a seamless transition with our innovative solution that enables current advisers and investors to remain operating exactly as they have for over a decade, whilst providing staff a wealth of new opportunities. Our members report a high level of satisfaction, and we are pleased that we can secure this proven capability for State Super and our members into the future.” 

Frontier CEO Andrew Polson, said, “This arrangement ensures that State Super’s decumulation investment expertise remains unconflicted and continues to serve the best interests of its members. Frontier now has added capability and can provide investors with the benefit of retaining control over their own investment policy, strategy and portfolio construction while accessing institutional grade end to end investment services and to maintain our unconflicted advice model in the process.”

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Firms with thoughtful, well-articulated ESG policies are more likely to anticipate shifts in consumer preferences, regulatory expectations, and reputational pressures.

Tony Adams, Head of Sustainable Investment Research at Lonsec Research and Ratings, explores the evolving ESG practices of fund managers, with a particular focus on firm-level assessments. Adams reflects on developments observed between 2023 and 2025, noting both progress and emerging challenges in how asset managers approach Environmental, Social and Governance (ESG) integration.

The commentary outlines improvements in internal ESG scores across firms, driven by stronger policy frameworks, clearer reporting, and enhanced stewardship practices. Increased transparency, including more frequent and detailed disclosures, has contributed to a more standardised understanding of ESG expectations. Many managers now publish narrative-rich reports and case studies that illustrate how ESG considerations influence corporate behaviour, with quarterly stewardship updates becoming more common.

​​​​​”ESG is now treated as a core aspect of investment communication, enhancing transparency and investor confidence. Regular reporting also allows firms to reflect emerging ESG issues in near real time and to communicate progress more dynamically.”

Adams also indicates that while proxy voting disclosures have improved, gaps remain in the depth of explanation provided, particularly when third-party advisors are involved. This can affect investor confidence in the authenticity of stewardship efforts.

“While outsourcing provides consistency, it can reduce transparency in ESG-sensitive or controversial proposals and erode client confidence in the authenticity of stewardship.”

The piece highlights a shift in how ESG is framed within firms. While commitment remains strong, there has been a move toward more generic policy statements and a reduced emphasis on detailed integration processes. ESG is increasingly positioned as a risk management tool, with less focus on its potential to drive investment opportunity or differentiation. This trend may lead to inconsistencies in ESG application across asset classes and styles.

Despite these challenges, Adams suggests that overall ESG maturity is increasing. Enhanced transparency and stewardship practices are helping investors better assess how ESG risks and opportunities are managed. Clearer reporting supports accountability and may reduce the risk of greenwashing, particularly in the face of heightened regulatory scrutiny.

Adams concludes by noting that strong ESG stewardship practices can contribute to long-term value creation and serve as indicators of broader investment competence.

“Firms with thoughtful, well-articulated ESG policies are more likely to anticipate shifts in consumer preferences, regulatory expectations, and reputational pressures.”

As ESG expectations evolve, managers with transparent and consistently applied strategies may be better positioned to maintain investor trust and meet regulatory requirements.

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Carl Prins

Pathzero has successfully completed an independent assurance audit of its award-winning climate analytics platform, Pathzero Navigator, marking a significant milestone in providing confidence and transparency to financial institutions managing climate risk.

The limited assurance audit, conducted by RSM Australia, assessed Navigator’s alignment to the global Partnership for Carbon Accounting Financials (PCAF) methodology, as well as calculation accuracy and software change management processes.

“This audit is an important step forward in giving our customers additional confidence that Pathzero Navigator is built on robust methodology, accurate calculations, and rigorous governance processes,” said Carl Prins, co-founder and CEO of Pathzero. “Financial institutions are under increasing pressure to manage climate-related risk with integrity. Independent assurance provides a critical layer of trust in the data and insights they rely on.”

“Providing climate-aligned data that can stand up to scrutiny is core to our mission,” added Prins. “We understand that having auditable data is vital for mandatory reporting and therefore hold ourselves to the highest standards – so our clients can trust the integrity of the methodology, the accuracy of the calculations, and the governance behind every software change made.”

The review examined Pathzero Navigator’s implementation of PCAF principles, validated embedded formulae and financed-emissions calculations, assessed business rules and emissions-factor handling, and evaluated audit trails, access controls, and change-management governance.

The outcome reinforces Pathzero’s commitment to industry best practice and to supporting customers with reliable, decision-useful climate data.

This assurance builds on Pathzero’s ongoing innovation in climate risk management, including recent launches of capabilities to assess physical risk and to manage climate risk across private market exposures. Pathzero is trusted by four of the ten largest super funds in Australia to support their transition plans.

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Lucian Peppelenbos

Investors are now preparing to adapt to the consequences of global warming that may be irreversible, alongside trying to stop it getting any worse. A new temperature record of 1.55 °C ± 0.13 °C above 1850’s levels was set in 2024, according to the World Meteorological Organisation. Underlying global warming, which is measured over decades, is thought to be about 1.3 °C.

As emissions continue to rise, and as disillusionment grows with governments’ commitment to net- zero initiatives, the fifth annual Robeco Global Climate Investing survey showed a growing proportion of investors think the Paris Agreement is no longer achievable. The Paris Agreement signed in 2015 seeks to limit global warming to 2 °C above pre-industrial levels by 2100, and ideally to contain it to 1.5 °C.

The number of investors who believe that 2 °C is not achievable rose to 44%, up from 41% last year and from 30% in 2023, while those thinking it can still be done rose slightly to 31% from 30%. A quarter of all investors remain unsure.

Meanwhile, only 16% of investors think an orderly transition toward net zero is the most likely outcome in the next decade, while almost half (49%) expect it to be ‘too little, too late’. Some 11% now expect to see a ‘hot house world’ outcome, with very little action taken to meet climate goals and avert physical risks, slightly up from 8% last year.

Accepting the inevitable?

Is it therefore time to recognise that it would be beneficial to invest in measures that can deal with the consequences of climate change, alongside the existing solutions for mitigating it? Almost half of all investors believe that it is.

Some 49% said climate adaptation will become an increasingly attractive growth theme for equity investments over the next three to five years, rising to 62% for European investors. One-third said they are actively seeking to increase exposure to companies providing these kinds of solutions.

Climate adaptation methods range from rebuilding sea defences and making air purification equipment and refrigerants, to new drugs that combat the spread of known and emerging diseases that warming temperatures and extreme weather events may exacerbate. Climate mitigation investment is mainly focused on decarbonization solutions, led by renewable energy and electrification.

But there remain headwinds, as 58% said there was uncertainty about whether adaptation solutions would generate competitive returns, while almost half blamed a lack of suitable investment products from asset managers (47%), or that it was hard to identify credible climate adaptation companies (42%).

Pursuing returns

In contrast, climate mitigation solutions are already well established, with proven returns from electric vehicles and renewable energy infrastructure such as wind turbines, solar panels and hydro-electric dams. Nascent technologies such as battery power and carbon capture and storage are rapidly showing they can provide revenue streams as well.

The pursuit of such returns in climate mitigation is a strong motivator for 77% of global investors, and this is even higher among North American investors (86%). Other motivating factors include achieving a real-world impact in tackling climate change (43%) and mitigating climate risk in portfolios (42%). Subsequently, over a quarter (27%) said they have been more focused on climate mitigation solutions than on adaptation.

Almost one-third (31%) expect to increase tech investments in new/emerging batteries, carbon capture and storage in the next two years, among other types of climate mitigation solutions such as waste reduction (27%), low-emission cement (18%) and green steel (17%). The latter two involve increasing use of electric-arc furnaces rather than coal-powered blast furnaces.

Priorities over the next two years show that electricity grid modernation is the most favoured investment (39%), followed by renewable energy (34%), with lower interest in battery technology (31%) and electric vehicles (28%). Interest in currently nascent technologies like low-emission concrete (18%) and green steel (17%) remain fairly low over the two-year horizon.

“Investors are already active in established areas such as renewable energy and clean power, electric vehicles and electricity grid modernisation,” says Lucian Peppelenbos, Climate and Biodiversity strategist at Robeco. “The next stage of the transition is about scaling investments in climate adaptation and the next-generation mitigation solutions such as hydrogen and low-carbon steel and cement.”

“Investors are on the lookout for these opportunities, but are cautious given the policy uncertainties. These type of investments require clear and consistent long-term policy frameworks. Rolling back the Green Deal or the US Inflation Reduction Act (IRA) does not help in that respect.”

Investment vehicles

In terms of how to invest in climate mitigation solutions, 44% of global investors said they used public market funds, 30% preferred private market funds, and 20% were making direct investments in nascent climate technology.

Robeco manages a range of investment strategies focused mainly on climate mitigation, smart energy solutions, and the pathways to net zero. All of our capabilities can be seen here:

By Lucian Peppelenbos, Climate and Biodiversity Strategist

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Johann Ple

AXA Investment Managers forecasts that green bond issuance will soar to US$600 billion in 2025, driven by supportive regulation, evolving market dynamics, and surging investor demand for credible ESG-aligned investments.

The spike in the global issuance of green bonds marks an important commitment to improved efforts in striving for sustainable public and private practices.

“The unprecedented growth in green bond issuance is a testament to the collective commitment of global markets towards a sustainable future. The current trajectory reflects a growing emphasis on transparency as well as the drive to direct capital towards the net-zero transition,” says Johann Ple, Fixed Income Portfolio Manager at AXA Investment Managers.

“The green bond market has shown increasing momentum in recent years, breaking new records with $447 billion in issuance in 2024. This dynamic has propelled the Green, Social, and Sustainability (GSS) bond market to surpass 2023 by 17%.”

The euro remains the dominant currency in the space, accounting for 60% of new green bond issuances.

While participation from emerging markets has dipped from 10.4% to 6.5%, this could reflect faster growth in other regions, particularly in Europe and Asia. Similarly, the US issuer share has fallen to 8.5%, contributing to a marked decline in USD-denominated green bonds.

Navigating the US ESG backlash

“Despite the current ESG backlash in the US, sustainable investments continue to grow boosted by the Inflation Reduction Act. However, rather than issuing explicitly labelled green bonds, many US corporates are choosing to incorporate sustainability objectives into their broader financing strategies,” says Johann Ple.

This dynamic has alleviated the past scarcity of issuance the market had experienced in some segments, creating a green premium, or ‘greenium’. However, as the green bond market has expanded significantly, this premium has largely dissipated. Today greeniums tend to emerge more on a case-by-case basis rather than across sectors, reinforcing the value of an active and selective approach to green bond investing.

China’s first sovereign green bond

A major development this year was the launch of China’s first sovereign green bond, marking the beginning of a broader surge in Asian issuance.

“As sustainable finance continues to mature, especially with strengthening regulatory frameworks and government support across Asia, we expect the region to become a key engine of growth following Europe,” Ple explains.

Green bonds in modern portfolios

Over the past eight years, the green bond sector has outperformed[1] the global aggregate universe six times out of eight due to a good mix of credit and sovereign debt. The trend points to an asset class that is fast shedding its niche status and offering investors broad diversification.

Initially, corporate issuances were concentrated in utilities and financials, but they have progressively broadened to include real estate, telecommunications, and transportation.

Blind spots in sustainable finance

While green bonds have aligned more closely with conventional bonds in terms of duration and ratings, key differences remain. The market is more concentrated in euro and dollar currencies and has greater exposure to credit, resulting in tracking errors of up to 200 basis points versus global aggregate benchmarks.

Ple adds, “We believe there is a simple way to allocate to green bonds while addressing this dilemma. We’ve found that by combining green bonds with US Treasuries improves performance correlation and reduces tracking error versus a global aggregate universe.”

This offers a liquid, low-cost way to bridge the gap with conventional markets.

The future of green bonds

Australia is making significant strides in the green bond market.

“Australian issuers are becoming more active, using sustainability and green bonds, with a steadily growing number of issuers and an increasing AUD to Australian issuances ratio,” notes Johann Ple.

This development is expected to attract more green capital to Australia and support the government’s 2050 net zero commitment.

Green bonds are among the most effective tools for supporting the transition to a low-carbon economy, an essential factor behind the sector’s rapid growth.

“Whether investors choose a tailored strategy or a blended approach, they can tap into the green bond universe through solutions that are both innovative and accessible,” concludes Johann Ple.

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