While we’re talking about asset managers and climate, there is this. InfluenceMap recently issued an assessment of 45 of the world’s largest asset managers (“Asset Managers & Climate Change 2023“), looking at equity portfolios, stewardship, and sustainable finance policy engagement activities with regard to climate risk and progress toward/alignment with Net Zero goals and targets. There are some surprises.
“… asset managers continue to hold equity investment portfolios misaligned with Paris Agreement goals, while their efforts to drive the transition through stewardship have stagnated. Meanwhile, the assessed firms do not show active and effective support for climate finance policy required to enable decarbonization pathways, and maintain memberships to industry associations actively blocking it.
… the ambition of US asset managers appears to have decreased, reversing an upwards trend up until 2022.
Across the board, the world’s largest asset managers’ equity funds invest in companies misaligned with net zero goals. This research was able to analyze $16.4 trillion of the asset managers’ equity fund portfolios. Of the portfolios assessed, 95% are misaligned with the goals of the Paris Agreement. Meanwhile, the asset managers collectively hold 2.8 times more equity value in fossil fuel production companies ($880 billion) than in green investments ($309 billion) in the assessed sample.”
An observation on my part: the reduced “ambition of US asset managers” may be connected to opportunistic outsized final returns of oil and gas stocks in 2022 – 2023, especially given the amount of fossil fuel holdings.
The results of this study seem somewhat in contrast to UK GFANZ members feeling some responsibility for Net Zero goals, but there are obviously differences in who was included. Even so, it sends mixed messages to pretty much everyone including operating companies making up financed emissions that are the basis of the misalignment claim. As I said in the previous blog: “It takes a village – operating companies need to execute on Net Zero programs, governments need to do their part in establishing clear legal guardrails and technical standards, and economies need to transition to new realities. No single entity can do it by themselves.”