Are major asset managers greenwashing with their net-zero targets?
Asset managers are excluding three-quarters of their investments from their 2030 climate targets, leaving their long-term net-zero targets on shaky ground.
That is according to a major new analysis from ShareAction, covering the environmental policies of 77 of the world’s largest asset managers. Collectively, these businesses manage more than $77trn of assets – more than a quarter of the global total.
Almost one-third (29%) of the asset managers covered by the analysis have set no interim emissions goals at all.
Of the assets managed by these firms, just 26%, in terms of their value, is covered by the interim climate targets they have set on the road to net-zero by mid-century.
This undermines the credibility of the long-term net-zero targets plus the firms’ ability to deliver against them, ShareAction is warning. Bodies such as the Science-Based Targets initiative (SBTi) and UN-backed Race to Zero require members to have verified interim targets aligned with the Paris Agreement.
For firms with interim targets but some exclusions, the most common loopholes are around Scope 3 (indirect) emissions. This is concerning given that, in many sectors, Scope 3 emissions account for the vast majority of the total climate footprint.
One such sector is fossil fuels. But less than one-quarter (23%) of the asset managers assessed have commitments to restrict investment in coal across all their funds. The proportion is even lower (13%) for those restricting investment in unconventional oil and gas, including fracking and oil sands.
ShareAction found that European asset managers are more likely to restrict fossil fuel financing than their counterparts in other continents.
Away from the energy sector, ShareAction has once again uncovered weak action on preventing deforestation and biodiversity loss from asset managers. Almost three-quarters of the asset managers had no deforestation-related commitments at all. None had public targets to prevent the conversion of other types of natural habitat.
The report states that many asset managers argue that they would need better data to set stricter 2030 climate goals or divestment and exclusion policies. ShareAction argues that this “does not stand up to scrutiny”.
It states: “Managers are deploying manpower and resources to collect the data but are simply not using it: For example, most managers perform climate scenario analysis, yet less than a third reported that they use these results to inform their approach to investment.”
Scenario analysis is a tool used to assess the resilience of assets and/or portfolios in a variety of warming trajectories. It is a key part of the Taskforce on Climate-related Disclosures (TCFD) framework; reporting against this framework is now mandatory for certain large finance firms in the UK.
The publication of the new ShareAction analysis comes amid AGM season, where, increasingly, activist investors have been seeking to take corporates and financial institutions to task over their climate-related disclosures and targets, with shareholder resolutions.
This week, shareholders at ExxonMobil rejected more than one-dozen shareholder resolutions relating to emissions goals, clean energy investments and climate reporting. Several had been filed by Follow This, with support from shareholders, including resolutions on Scope 3 emissions.
Other topics covered included methane gas measurement and preparing for the worst case in the event of oil spills. The former proved more popular than the latter, presumably given the firm’s role in delivering the US’s commitments under the Global Methane Pledge.
Chevron also rejected a proposal to reduce Scope 3 emissions from the customer use of its products.
Both firms held their meetings online, partly to prevent protests from environmentalists.
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