Asset Managers & Climate Change 2023

A FinanceMap Report

August 2023

Climate analysis of the sector’s portfolios, stewardship, and policy influence


See coverage in Bloomberg, Reuters, FT Sustainable Views, Institutional Investor, ESG Investor, Financial Advisor, Investment & Pensions Europe, Barron's, Politico, CityWire, MarketWatch, Pensions Age, Boursorama, Corporate Knights, FS Sustainability, The Straits Times , Les Echos.

FinanceMap’s 2023 Asset Managers and Climate Change assessment of 45 of the world’s largest asset managers shows that the firms have not made significant progress on climate goals since 2021, despite an increase in climate targets through Net Zero Asset Managers (NZAM) and similar initiatives. This research, a product of InfluenceMap's FinanceMap program, assesses the managers' equity portfolios, stewardship, and sustainable finance policy engagement activities. The FinanceMap platform allows in-depth investigation of the analysis and findings for each of the asset managers assessed.

  • With $72 trillion in cumulative assets under management, the 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.

  • Particularly, the ambition of US asset managers appears to have decreased, reversing an upwards trend up until 2022. This reversal 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.

  • 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.

  • A number of smaller, European asset managers’ portfolios appear to outperform their peers, with Natixis and Schroders receiving positive Portfolio Paris Alignment scores, and Schroders and BNP Paribas Asset Management both having 2.7 times higher exposure to green investments than the average asset manager. This contrasts with the large US and Japanese asset managers, who continue to demonstrate below average alignment scores. Particularly negative equity fund portfolios include Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, Daiwa Securities, and BNY Mellon. The assessed equity funds for Goldman Sachs and State Street Corporation 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.

  • Meanwhile, this assessment finds 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 most robust climate stewardship continues to come from European managers Legal & General Investment Management, UBS Asset Management, and BNP Paribas Asset Management, as well as Federated Hermes. All show clear evidence of engagement with companies on the transition of business models and are active members of Climate Action 100+ (CA100+). This is in stark contrast to the big four US asset managers BlackRock, Vanguard, Fidelity Investments, and State Street Global Advisors. All of these asset managers receive a FinanceMap Stewardship Score of C+ or lower, indicating a lack of effective climate stewardship processes and use of shareholder authority to engage companies to transition. Fidelity Investments and Vanguard are non-members of the CA100+ process and the Net Zero Asset Managers (NZAM) initiative, following Vanguard’s departure from NZAM in December 2022.

  • This analysis finds that support for climate-ambitious resolutions was on the rise until 2021, with the average asset manager supporting 35% of climate-relevant resolutions in 2019, and 61% in 2021. However, 2022 saw a considerable drop in such support, with the average asset manager supporting just 50% of climate-relevant resolutions. Particularly, US-based asset managers displayed a trend of voting against a large portion of climate-related resolutions in 2022, with the average US manager supporting just 36% of climate resolutions, compared to 50% in 2021.

  • This research also finds that the world’s largest asset managers are not utilizing their considerable policy advocacy influence to drive ambitious sustainable finance policy, despite publicizing top-line messaging emphasizing its importance. For instance, a number of the asset managers assessed were unsupportive of scope 3 emissions disclosure as part of the US SEC climate disclosure rule, including BlackRock, Vanguard, and J.P. Morgan Asset Management.

  • Meanwhile, 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.

  • In conclusion, this report finds 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. Stewardship efforts appear to have stagnated, contributing to continuously climate-misaligned portfolios, while policy support is largely absent. 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.

All firms covered in this research were offered the opportunity to review the analysis and provide feedback prior to release. For details on our content and terms of use, please see our Terms and Conditions.

For any questions about this report, please reach out to financemap@influencemap.org.

Correction, 10/08/2023: The report has been amended to reflect minor changes to the Results table and to Figure 6; 29/08/23: Minor changes to Figure 5.

About InfluenceMap

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).

Downloads

You will be required to register or login to our site to download these files.

Alignment between the climate commitments of companies and investors and the actions and engagements they carry out is critical. Asset managers can — and should — play a crucial role in building alignment. This is precisely why asset owner-led initiatives like the UN-convened Net-Zero Asset Owner Alliance have prioritized engaging with the asset manager community.

Jake Barnett, Engagement Track Co-Lead Net Zero Asset Owner Alliance, Managing Director of Sustainable Investment Strategies, Wespath

It is not enough to challenge companies to dramatically reduce emissions and create strategies to drive that goal. If large investors say addressing global warming is important, then they too need to step up and do the necessary work to steer our economy down a less-chaotic path. That means supporting shareholder proposals to send a market signal, voting against directors when failure is clear, getting your own Net Zero house in order, and planning beyond the next quarter to fully account for the long-term and irremediable economic and social impacts if we don’t respect the science.

Christina Herman, Senior Director for Climate Change & Environmental Justice, Interfaith Center on Corporate Responsibility