World’s largest asset managers ‘far off track’ on meeting net-zero commitments

Written by Adam Cadle

01/08/2023

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 thinktank FinanceMap.

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. 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.

The study also showed that the portfolios of the world’s 45 largest asset managers, which collectively hold $72trn in 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. Furthermore, 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 behind 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.

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 Asset Management 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 US, BlackRock recorded a drop in its stewardship score (C, down from B in 2021). Vanguard recorded a score of D+, Fidelity Investments E+, and State Street Global Advisors 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 One both 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 displaced a trend of voting against a large portion of climate-related resolutions last year, with the average US managers supporting just 36% of climate resolutions, compared to 50% in 2021.

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