INSIGHT by the InfluenceMap
The world’s largest asset managers are far off track to meet their own 2050 net zero commitments, according to a new study released by FinanceMap. The analysis finds that the world’s largest asset managers have not improved their climate performance over the past two years and in some cases have reversed positive trends, despite most having set net zero by 2050 targets through initiatives such as the Net Zero Asset Managers (NZAM).
FinanceMap’s Asset Managers and Climate Change 2023 report scores 45 of the largest asset management companies based on three criteria: equity portfolio analysis, stewardship of investee companies, and sustainable finance policy engagement.
All asset management firms analyzed in this work were consulted on their results prior to release. Full results for each asset manager are available at FinanceMap.org.
“The data shows that while they may talk the talk, most asset managers are not walking the walk when it comes to using their influence to drive real change in investee companies and sustainable finance policy. Since FinanceMap’s 2021 report, asset managers’ portfolios are still misaligned with net zero targets, environmental stewardship efforts have stagnated, and asset managers are not supporting effective sustainable finance policy.”
-FinanceMap Program Manager Daan Van Acker
Additional key findings from this year’s report include:
〉The portfolios of the world’s 45 largest asset managers, which collectively hold $72 trillion in assets under management (AUM), continue to be highly misaligned with Paris Agreement goals. Of the equity fund portfolios assessed, 95% are misaligned with the IEA Net Zero Emissions by 2050 Scenario.
〉Collectively, the asset managers hold 2.8 times more equity value in fossil fuel production companies than in green investments in the assessed sample. FinanceMap identifies ‘green’ investments on the basis of the EU Taxonomy and Bloomberg data.
〉The number of Stewardship A-List asset managers, those carrying out truly ambitious and effective climate stewardship practices relative to best practice, has decreased by 45% since 2021.
〉While US asset managers have always lagged their European competitors, this year, US asset managers appear to have pulled back even further on their ambition in top-line climate messaging, as well as in their company engagements and resolution voting. This shift has occurred amidst an ‘anti-ESG’ trend in over fifteen state legislatures.
〉European asset managers top the chart when it comes to engagement with investee companies on climate. Legal & General Investment Management (A+) and the asset management arms of BNP Paribas (A) and UBS (A) all scored within the A grade. European managers Natixis and Schroders received the highest Portfolio Paris Alignment scores, while BNP Paribas was found to have 2.7 times higher exposure to green investments than the average asset manager in the assessed equity fund sample.
〉In the U.S., BlackRock, recorded a drop in its stewardship score (C, down from B in 2021). This puts it in the middle of the pack among its poorly scoring US peers Vanguard (D+), Fidelity Investments (E+), and State Street (C+). Notably, BlackRock has scaled back its calls to transition business models, while Fidelity Investments continues to be the least active manager in stewarding companies in the entire assessment.
〉In Japan, Sumitomo Mitsui Trust Asset Management and Mizuho subsidiary Asset Management Oneboth scored B- on engagement with companies on climate change. Equity portfolios in Japan remain among the most misaligned with net zero globally.
〉Support for climate-positive shareholder resolutions saw a notable decline in 2022, with the average asset manager supporting just 50% of such resolutions, compared to 61% in 2021. Particularly, US-based asset managers displayed a trend of voting against a large portion of climate-related resolutions last year, with the average US manager supporting just 36% of climate resolutions, compared to 50% in 2021.
〉Despite publicizing top-line messaging on the importance of sustainable finance policy, the asset managers are not utilizing their policy advocacy influence to support ambitious policy processes in Europe and the US. For instance, a number of asset managers, including BlackRock, Vanguard, and J.P. Morgan Asset Management, were unsupportive of Scope 3 emissions disclosures as part of the US SEC climate disclosure rule.
〉86% of the asset managers assessed in this report are members of at least one industry group opposing sustainable finance policy required to enable decarbonization pathways. Notable industry groups representing the asset management sector and opposing ambitious policy are 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.
| methodology
The methodologies used in this research rely on publicly available information and financial databases. Assessments are built around industry-standard and science-based benchmarks such as the EU Taxonomy, the PACTA tool using the IEA Net Zero Emissions by 2050 scenario, and the UK FRC Stewardship Code, among others. FinanceMap assesses three areas of asset manager activity: portfolios, stewardship, and policy engagement. Full details of our methodologies are available on our website. FinanceMap provided all the asset managers with an opportunity to comment on this analysis and engaged in depth with many of them.
| about
InfluenceMap is a non-profit think tank providing objective and evidence-based analysis of how companies and financial institutions are impacting the climate and biodiversity crises. Our company profiles and other content are used extensively by a range of actors including investors, the media, NGOs, policymakers, and the corporate sector. InfluenceMap does not advocate or take positions on government policy. All our assessments are made against accepted benchmarks, such as the Intergovernmental Panel on Climate Change. Our content is open source and free to view and use (https://influencemap.org/terms).
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
