Despite commitments to sustainability, BlackRock, Vanguard and Goldman Sachs are among the asset managers investing more in polluting companies than in those actively working to lower their carbon footprints, according to a new report from FinanceMap, which is affiliated with climate nonprofit InfluenceMap.
The study, which analysed $16.4 trillion in stocks held by 45 of the world’s biggest asset managers, found only Natixis and Schroders have more investments in companies working toward meeting the goals of the Paris Agreement than in companies tied to polluting technologies.
“The data shows that while they may talk the talk, most asset managers aren’t walking the walk when it comes to using their influence to drive real change in investee companies and sustainable finance policy,” said Daan Van Acker, programme manager at FinanceMap.
The report was the third by FinanceMap since 2019 and sought to determine whether a recent increase in the number of climate initiatives and commitments, such as the Net Zero Asset Managers initiative, has made a difference in how asset managers invest and engage with companies.
More than 300 investment firms have joined the Net Zero Asset Managers initiative since it launched in December 2020, pledging to support a goal of net zero greenhouse gas emissions by 2050
However, together, the 45 asset managers have 2.8 times or $880 billion more invested in companies involved fossil fuel production than in green investments at $309 billion.
Asset managers in Europe, where environmental disclosure requirements have become more rigorous, scored the highest in terms of working with companies to transition, led by Legal & General Investment Management, UBS Asset Management, and BNP Paribas Asset Management.
By contrast those in the US were found to be among the worst offenders. The report noted that the their ambition appear to have decreased, reversing an upwards trend up until 2022.
This lack of commitment coincides with the recent ‘anti-ESG’ trend in the country, with some state legislators seeking to limit investors’ use of ESG factors and the phase-out of fossil fuel investments.
The assessed equity funds for Goldman Sachs and State Street are the most exposed to the fossil fuel production value chain, both with 2.2 times higher exposure to the sector than the average asset manager, the report said.
The report also showed that the portion of asset managers carrying out effective stewardship practices relative to best practice has decreased since 2021.
The percentage of assessed managers receiving a FinanceMap stewardship score in the A band — demonstrating ambitious, effective, and transparent climate stewardship practices — decreased from 33% in 2021 to 18% in 2023.
The research also noted that the world’s largest asset managers are not utilising their considerable policy advocacy influence to drive ambitious sustainable finance policy, despite publicising top-line messaging emphasising its importance.
For instance, a number of the asset managers assessed were unsupportive of scope 3 emissions disclosure as part of the US Securities and Exchange Commission climate disclosure rule, including BlackRock, Vanguard, and J.P. Morgan Asset Management.
Meanwhile, it said industry associations representing the asset management sector continue to strategically oppose ambitious sustainable finance policy globally, including the Investment Company Institute (ICI) and Securities Industry and Financial Markets Association (SIFMA), in the US, and the European Fund and Asset Management Association (EFAMA) in the EU.
Of the 45 asset managers assessed in this report, 86% are members of at least one of these industry groups.
The report said there was a “significant gap between the increase in net-zero commitments by the world’s largest asset managers and their lack of meaningful short-term climate action.”
Ir added stewardship efforts appear to have stagnated, contributing to continuously climate-misaligned portfolios, while policy support is largely absent.
It believes to bridge this gap in the immediate term, firms can disclose and review their industry association memberships to ensure these are aligned with their climate goals, and increase support for ambitious sustainable finance policy.
Additionally, to ensure the credibility of its climate commitments, the asset management sector will need to intensify its engagement with climate-critical sectors and companies, as well as implement robust shareholder voting processes, with the ultimate aim of driving the real-economy transition.
©Markets Media Europe 2023
