Global institutional investors will nearly triple their divestments from fossil fuels in the next decade, according to Octopus Group.

The investment group has surveyed pension funds, fund of funds, insurance companies, private banks and sovereign wealth funds around the world who represent $5.9trn (£4.7 trn) worth of assets under management and discovered that they plan to plan to divest 15.6 percent of their portfolios from fossil fuels over the next ten years, almost tripling the outflows of 5.7 percent that are planned for next year.

Among the survey’s respondents, the divestment will see $920bn (£732bn) of assets moved into greener assets.

Renewable energy infrastructure is set to benefit from this shift, says Octopus, with institutional investors planning to ramp up allocations to renewable energy infrastructure to 5.2 per cent over the next 12 months, which will more than double to 10.9 per cent by 2029, amounting to some $643bn (£512bn).

However, Octopus has identified a number of barriers to greater investment in renewable energy infrastructure. Almost half (45 per cent) of global respondents cited energy price uncertainties as a key blocker, followed by a lack of renewable energy investment skills within their own organisation (36 per cent) and liquidity issues (19 per cent).

In a report on the research, called The Great Transition: Opening the Renewables Floodgate, Octopus also says that financial institutions particularly optimistic about their ability to slow global warming, with 71 per cent of saying that they believe their investment strategies could be used to make a material difference to climate change outcomes.

Moves such as the UK Government’s commitment to a net zero target by 2050, and high-profile campaigning activity including Extinction Rebellion and Greta Thunberg, are spurring global institutions into action.

According to the Octopus report, nearly half (44 per cent) of institutions have reconsidered their investment portfolio following increased climate change activism over the past year.

Octopus Renewables co-head, Matt Setchell, said that the survey’s results provide a “glimmer of hope” but said that relying on divestment from fossils fuels was not the only answer to “averting a climate crisis”.

He added that it was disappointing that the proportion of capital divested from fossil fuels assets and reinvested into renewables and clean tech wasn’t higher.

“If we are to unblock investment into these areas, institutional investors will need to become comfortable with different types of investment risks,” he said.

“This in turn demands better, wider-ranging products to accommodate institutional investors’ objectives, so more of them feel ready to divert funds into assets that will help save the planet.”

His colleague, Octopus Renewables, co-head, Alex Brierley, said that bolder commitments had to be made from investors if the world was to transition to a renewable energy future.

“Institutional investors can play a critical role in reaching this global goal by galvanising capital towards renewable energy infrastructure,” he said.

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