Asset Management Companies Are Providing Climate Change Expertise

8 Jul, 2020

According to asset management market trends, asset management companies are increasingly providing climate change expertise and are integrating it in their investment process. Physical assets such as buildings, offshore structures and transportation systems operate in a dynamic environment where they are exposed to short, medium and long-term variability in ambient environmental conditions. Thus, climate change plays an important variable in determining the durability of these assets. While the consequences of climate change may not be fully felt for decades to come, the impact on society, the economy and regulation will create huge value shift in the market much sooner. Thus, asset management companies looking to capitalize on these value shifts are explicitly incorporating climate science expertise into their investment decision-making processes. Companies such as Mott MacDonald have already included climate change expertise in their product portfolio.

The global asset management market size reached a value of nearly $656.9 billion in 2019. The market is expected to decline to $598.9 billion in 2020 at a compound annual growth rate (CAGR) of -8.8%. The decline is mainly due to lockdown and social distancing norms imposed by various countries, and the economic slowdown across countries owing to the COVID-19 outbreak. The asset management market share is then expected to recover and grow at a CAGR of 9.6% from 2021 ad reach $788.8 billion in 2023.

Asset management companies (AMC) are the companies that pool funds from clients, and invest the capital in several financial products such as stocks, bonds, mutual funds, index funds, and hedge funds among others, with the aim of maximizing returns. Asset management companies make investment decisions considering several factors such as client’s risk and investment preferences, tax needs, liquidity needs, and moral and ethical beliefs. Clients of asset management companies include the general public, corporations, government and non-government institutions whose assets are managed by these companies.

Several asset management companies are investing in big data analytics capabilities to generate insights around clients. Big data solutions are being implemented to deliver insights around client segments, product penetration, and analyze training program effectiveness. Asset management companies are exploring applications for big data analytics that go beyond investment management. Sales and marketing teams are looking to examine investor and distribution information to improve customer acquisition, retention and conversion; reduce redemption and improve capital raising. In 2017, there were almost 14,000 research publications in the asset management industry that contained big data or analytics as keywords. Asset management companies such as BlackRock have been increasingly investing in big data analytics technology, to provide their clients interesting investment insights.