The increasing focus on net zero is "changing the game completely" for investors, with "massive" demand from pension schemes for the integration of net zero within investment portfolios, according to BlackRock global head of alternative specialists, David Lomas.

Speaking at the Pensions Age Autumn Conference 2021, Lomas warned that net zero is a "major challenge" for investors, arguing that the issue "isn't going away".

He stated: "I think this type of construct is going to continue to change the way portfolios are built and constructed, and we're going to have to improve data quality to be able to do reporting.

"We’ll have to improve data quality for modelling, we’ll have to improve data quality for consistency, and we're gonna have to deliver value in a way that allows you to make better informed decisions. Today, that is lacking in many portfolios. So, I would say that net zero is the major challenge for investors.

"The dominance of environmental, social and governance (ESG) as it contributes to revenue that is just growing, so this isn't going away, and it's just going to become more and more important for organisations to get around, both as an investment group, and as an investor."

Indeed, Lomas said that ESG integration is "paramount to every single request for proposal (RFP) we get", explaining that there are also many thematically-focused opportunities to consider.

Adding to this, BlackRock head of UK corporate pensions, Armit Bhambra, noted that applying stewardship and voting in the private debt and private equity space can be "very difficult", identifying this as "a challenge that we need to get our arms around".

"Many of our pensions clients are very focused on index equities, very very focused on the next leg up kind of index fixed income, but at some point, and I think really the time is now, getting your arms around the issue from a total portfolio perspective is key, and private markets are an important part of that," he continued.

“There is a real opportunity here, as we go forward, to improve and have significant impact on your ESG ambitions through allocation to private markets."

Lomas also highlighted private markets as the "perfect way to get access to this exposure", explaining that schemes are closer to the company and can therefore help drive progress on key issues.

"It's very hard to do that in the public space for the stewardship, voting and engagements, much harder," he said. "In private markets, it gives you a great opportunity to actually shape shift the organisation's into the direction that is going to be good economically for the organisation, but also from a societal perspective."

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