Despite the focus on the environment, asset managers engage with less than 20% of their portfolio companies on climate impact on average, according to Redington’s 2021 Sustainable Investment Survey.
The study which polled 112 asset managers globally, covering 220 strategies and $10tn in assets under management (AUM), examined the methodology used by managers to engage with investees on sustainability topics.
It found managers engaged with less than 15% of portfolios on the topic of net zero, despite 63% of managers reporting they had made commitments to Paris targets or similar, and less than 11% had addressed Scope 3 emissions with companies.
Scope 3 emissions is defined by the Greenhouse Gas Protocol, a joint initiative of World Resources Institute and WBCSD with the aim of keeping the global temperature rise below 1.5 degrees Celsius. It targets the entire organisation and specifies 15 categories, including purchased goods, waste generated, fuel-related activities, use of sold products, investments, franchises and employee commuting.
“It is widely recognised that climate-related risks not only affect our planet, but the economy too – a sentiment seemingly echoed by asset managers through the various public net-zero commitments made over the past year or so,” said Anastasia Guha, global head of sustainable investment at Redington.
She added, “Yet in order to really make progress, our industry must continue to close the gap between the words we use and what we deliver in practice. These actual levels of engagement imply that some of our words could be akin to greenwashing, which doesn’t help anyone,” she added.
Redington found that it is not just climate impact that lack attention from asset managers. Supply chain human rights & pollution, and biodiversity also had low levels of engagement, with 9% and 8% of portfolios having been engaged on these topics respectively.
Guha said that given the material impact of these issues on clients and beneficiary interests, it is imperative asset managers direct their attention to these areas.
As to broader integration of climate-related risks and opportunities, the survey found that only 80% incorporate the measurement and assessment of these factors into their investment processes.
The research also raised concerns around the extent to which this integration was translated into concrete investment decisions, as well as around an inability for asset managers to differentiate between the various components of environment, social and governance (ESG).
For example, only 64% could provide an example of where an investment decision had been affected by a climate view in the last six months.
Moreover, when asked for specific examples where investments had been sold based on climate change views, several asset managers referred to decisions based on social factors, rather than climate.
“Assessing asset managers’ and specific investment teams’ climate and ESG capabilities is a key input into our asset manager research process as we believe it’s fundamental to having a robust strategy that’s aligned with our clients’ climate objectives,” said Guha.
“Only by working together as an industry will we be able to tackle the monumental task that climate change poses and help drive the global transition to net zero.”
©Markets Media Europe 2021
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