The evolving sustainable investment landscape for large asset owners 

Large asset owners can be highly influential through their allocation of capital, influencing economic and societal outcomes globally. But that does not mean they move in one homogenous fashion. 

Each asset owner may have their own individual governance and investment needs, with unique values and policies, objectives and stakeholders to manage. While terminology can be debated, sustainability continues to be a key area for some asset owners. Indeed, the past year has seen several significant changes in the way asset owners are approaching the management of non-traditional risks to their portfolios, including climate-related risks.

In our Large Asset Owner Barometer 2025, surveying over 70 asset owners with a combined AUM of more than $2 trillion, we found that organisations managing over US$20 billion in AUM were more likely to incorporate sustainability goals into portfolios. 81% included sustainability goals in their investment policies, compared to 64% of organisations with less than US$20 billion in AUM. This is to be expected as this pool of capital can operate on far longer time horizons meaning the incentives to manage longer term risks to portfolios could be greater.^[1]

Nearly half of the asset owners we surveyed also noted that they have already introduced climate transition targets, with a further 15% expecting to do so within the next two years.^[2] While these asset owners are remaining committed to their targets, we do find a noticeable decline in those planning to set targets, with 39% saying they are not planning to set targets compared with only 8% the year before. There are several possible reasons for this, with some questioning the credibility of targets that are too broad in scope, while others are more focused on shorter-term challenges related to the current macroeconomic landscape. 

More generally, these issues may have been compounded by challenges surrounding regulation like the Sustainable Finance Disclosures Directive (SFDR) in Europe. While evolving regulations such as the Corporate Sustainability Reporting Directive (CSRD) could potentially bring greater structure, scope, and scrutiny to how businesses report on sustainability throughout the European Union,^[3] there have been delays. This may explain why we’re observing a temporary drop in new target setting, with the expectation that greater clarity around policy will reverse this trend.

Although investor momentum to setting new climate targets has arguably slowed, impact investing still has traction. We define Impact as targeted investments designed to generate specific, measurable social and environmental benefits alongside generating financial returns. It serves as a way for asset owners to be targeted in terms of specific objectives they are looking to meet. According to the Large Asset Owner Barometer, impact strategies are expected to be the third most popular destination for inflows, with only private credit and infrastructure having higher net expected inflows over the next 12 months.^[4]

Over the past three years, specialist infrastructure funds targeting transition assets have raised more than $100 billion.^[5] Our proprietary research highlights the scale of what is required, showing that around 55% of the financing needed for the global transition must come from the private sector – almost six times the current annual funding levels – with private capital also needed to help close a projected $15 trillion global infrastructure shortfall by 2040.^[6][7] The tilt displayed here toward private markets reflects where sustainability can be most financially material. Large asset owners, in particular, can have a role here in positioning capital not around climate ambition alone, but in areas offering the strongest long-term value.

One area of particular interest is the acceleration of the energy transition, which could raise confidence among asset owners that their own climate targets can subsequently be met, which would encourage investors to re-engage with their climate transition objectives.

Between 2018 and 2023, global solar photovoltaic capacity tripled, and in 2025 renewables are expected to generate more electricity than coal for the first time.^[8] For investors, this creates opportunities not only in clean energy generation but also in the next generation of infrastructure – smarter grids, storage, and technologies for hard-to-abate sectors.^[9] Studies show that climate-related hazards are in fact developing sooner than expected. These hazards present risks for companies whose financial outcomes depend directly on physical assets, such as office developments, networks of factories, or timber plantations.^[10] Therefore, flood-defended transport systems, storm-hardened energy networks, and retrofitted buildings are not only reducing exposure to physical risk, but protecting long-term value – reinforcing the case for large asset owners investing in resilient infrastructure and adaptation.^[11]

Our 2025 Swing State report identifies circularity as another theme shaping allocations.^[12] Regulation in Europe is setting standards that may extend globally, creating opportunities in areas such as battery recycling, regenerative agriculture and sustainable forestry. These strategies not only mitigate risks linked to resource scarcity but also open new sources of return, from biodiversity credits to ecosystem restoration projects. Circular investments are demonstrating how capital can both hedge against systemic risks while also generating growth.

Although appetite for net zero targets among those who are yet to set them is arguably slowing, asset owners that have targets remain committed to them. For these investors, net zero can be a strategic alignment tool and one of several ways to manage financially material climate risks that are now being recognised as systemic. Climate change and extreme weather events pose both physical and transition risks that can affect long-term returns, and managing them requires integration across portfolios, engagement with companies, and allocation to credible transition solutions.

We recognise that investors have differing objectives, and for some, aligning with net zero remains the clearest framework for supporting decarbonisation in the real economy. Others may prioritise managing financially material climate risks without formal targets or focus on the opportunities arising from the global shift to a low-carbon, nature-positive and more equitable economy. Crucially, these approaches can remain separate from one another.

For corporates, the development of new technologies, nature-based solutions and sustainability-linked infrastructure can create opportunities for investors to pursue returns and positive real-world outcomes simultaneously. The objective here is not only to mitigate downside risk, but also to capture the growth potential embedded in this climate transition.