Pension Funds Letter 19 - The twists and turns of responsible investing across the pension landscape

Editorial

The twists and turns of responsible investing across the pension landscape

Inflation pressures may well have fallen as we near the end of 2023, but at times it can seem like they’re the only thing trending in the right direction. Question marks remain plentiful over the next actions for central banks and the probability of a slowdown in developed markets. Elsewhere crises and geopolitical tensions proliferate, global fragmentation is increasing and warnings over the consequences of climate inaction become ever more frequent and urgent.

It is in this context that we seek to look again at the role of responsible investing, in particular the contribution of one of the largest investors in ESG, pension funds. The 2023 Amundi-CREATE pension survey takes a closer look at sustainability investing following the series of exceptional events in 2022, triggered by the invasion of Ukraine, which hit investment strategies across the board and ultimately saw ESG strategies underperform. 2022 also saw major progress on ESG regulation and policy in major markets worldwide, which aim to improve consistency and transparency. The survey examines how pension fund’s perception of responsible investing may have changed following these developments, what are their goals and how do they hope to achieve them.

Despite the higher level of complexity and uncertainty that markets face, we remain convinced that responsible investment delivers long-term value to investors. The results of the 2023 survey underlines how it is evolving to focus on changes in the real economy in addition to its financial returns.

We continue this ESG themed letter with a look at one of the major sources of risk for pension funds – climate risk – and more specifically, how pension funds are addressing the net zero transformation in their investment portfolios.

After that, we look ahead to next year more broadly and present Amundi’s outlook and investment convictions for 2024. We also share our views on the next priorities for responsible investing as a whole and the main themes that will impact the industry with a particular focus on the energy transition.

Finally, we wrap up this final edition of 2023 with our usual look at the pension funding ratios and whether the positive momentum seen at the beginning of the year has continued.

EXECUTIVE SUMMARY