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Navigating Sustainable Investing

Regulation as a Driver of Opportunity and Risk

For many investors as sustainability considerations move closer to the forefront of investment strategies, regulation has emerged as a key driver of both opportunity and risk.

This shift is being primarily driven by improved data availability, new scientific insights such as those from the UN’s World Meteorological Organization, policy changes and growing voter interest, all of which has pushed climate and sustainability issues higher up on political agendas in many jurisdictions. According to a recent Pew Research Center survey, a median of 75% of people across 19 countries in Europe, North America, and the Asia-Pacific region see climate change as a major threat — higher than concerns over misinformation (70%), cyberattacks (67%), the economy (61%), or infectious disease (61%).

This growing sociopolitical concern is influencing some policymakers and, in turn, reshaping the regulatory landscape for many institutional investors. For those managing institutional portfolios, understanding and adapting to these changes may be crucial.

The latest survey by State Street Global Advisors, The Climate Opportunity, highlights the importance of regulation in sustainable investing decision-making among EMEA-based asset owners ("Asset Owners"). Keeping pace with new regulation is the second-highest driver for Asset Owners integrating climate-related issues into their investment decisions, just behind investment risk. This dual role of regulation – as both a risk to be managed and an opportunity to be seized — is shaping the strategies of institutional investors around the world.

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