Gap between asset managers' climate targets and action remains 'painfully wide'

Written by Sophie Smith

06/12/2023

The gap between asset managers’ climate assertions and evidence of action remains “painfully wide”, according to analysis from Redington.

Redington’s fourth annual Sustainable Investment survey found that, overall, 86% of strategies now measure climate-related risks and opportunities.

Just under a quarter (23%) of managers have also continued to hire dedicated climate resource, mostly to support disclosure & regulatory obligations and stewardship, as well as boosting research and development teams.

However, evidence of climate action in practice is still considerably lagging, as the survey found that while 74% of managers monitor emissions-based metrics for their portfolios, only 38% of managers monitor some sort of portfolio alignment metric.

Concerns were also raised around emissions, as the report found that a "surprising" 20% of managers still don’t measure the Scope 1 & 2 (direct emissions) of their portfolios, and "worse yet", 32% of managers still don’t measure Scope 3 emissions.

In addition to this, Redington found that while a high-level commitment to net-zero continues, with 57% of managers reporting some kind of firm-wide pledge, this hasn’t filtered down to strategy level, with only 30% having commitments here, down from 34% in 2022.

More broadly, the survey found that nearly two thirds (62%) of surveyed firms have set some form of decarbonisation target, five percentage points higher than net-zero commitments specifically.

However, of those that have set strategy-level decarbonisation targets, Redington found that 16% of the strategies do not yet monitor emissions-based metrics.

Redington vice president – sustainable investment, Edina Molnar, commented: “In reflecting on where the industry was just three years ago compared with where we are now, we are encouraged by the general shift among managers to take climate considerations into account alongside financial factors.

“Nevertheless, there needs to be more evidence of actions and outcomes across the spectrum. The number of managers not measuring scope 3 is particularly disappointing and begs the question of whether managers are truly integrating climate-related considerations into investment decisions.”

Adding to this, Redington head of manager research, Oliver Wayne, warned that a failure to measure emissions in particular could undermine trust in the robustness of decarbonisation targets, suggesting that this could be a key area for improvement moving forwards.

With 2030 fast approaching and marking a key deadline for multiple commitments, Wayne said that the whole industry must continue challenging, collaborating and innovating to avoid stagnating and inaction on climate change.

"We will continue to engage with managers to discuss current barriers to progress and drive action in areas where it is evidently lacking," he said. "This includes assessing the feasibility of strategy-level decarbonisation targets and improving data quality across the board.”

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