InfluenceMap: World’s largest asset managers ‘far off track’ in net-zero transition

The analysis, conducted by InfluenceMap’s FinanceMap team, shows little improvement in the climate strategies or impacts of asset management giants over the past two years.

In fact, several of the largest players in the US seem to have reversed their previous positive work amid the anti-ESG row led by Republican policymakers. They have nonetheless kept their stated climate commitments on display.

FinanceMap looked at each asset manager’s portfolio and its plans for divestment and engagement to reduce emissions. The team also assessed stewardship and governance practices, plus the ways in which each company was supporting – or undermining – more progressive policymaking for sustainable finance.

Only two companies, Schroders and Natixis, currently manage portfolios with emissions set to fall in line with the Paris Agreement on climate.

Four of the world’s largest asset managers are classed as significantly misaligned with the Paris Agreement in terms of their portfolios, namely Goldman Sachs, Vanguard, BlackRock and State Street Corporation. Globally, the most misaligned firm was found to be China’s Ping An.

Collectively, the 45 asset managers hold almost three times more equity value in fossil fuel production companies than in green investments. Green investments are calculated using the EU’s taxonomy definitions.

FinanceMap also found that none of the world’s largest ten asset managers scored higher than a ‘D’ grade on policy engagement.

“The data shows that while they may talk the talk, most asset managers are not walking the walk when it comes to using their influence to drive real change in investee companies and sustainable finance policy,” said FinanceMap Program Manager Daan Van Acker.

“Since our 2021 report, asset managers’ portfolios are still misaligned with net-zero targets, environmental stewardship efforts have stagnated, and asset managers are not supporting effective sustainable finance policy.”

Global split

“While US asset managers have always lagged 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,” FinanceMap said in a statement.

In terms of stewardship and governance, BlackRock’s overall score fell from a B in 2021 to a C this time around. Other large US-based managers also score poorly here. State Street’s grade is C+ and Fidelity Investments’ is E+. Goldman Sachs scored a D, as did JP Morgan.

In comparison, many European players scored a ‘B-‘ or better. They include Credit Agricole, Allianz, UBS, BNP Paribas, Federated Hermes, AXA and Deutsche Bank.

At least 15 US states have introduced anti-ESG legislation discouraging finance firms from investing using these metrics in recent months.

Morningstar’s director of investment stewardship Lindsey Stewart said: “It’s clear that in Europe, there’s a ‘tailwind’ of climate-conscious regulation and standard setting that provides cover to asset managers to demand more ambitious action.

“In the US, it seems that the opposite is currently true. So, the report shows the same transatlantic divide that we’ve seen in Morningstar’s own research, where European managers have shown a higher level of support for ambitious net zero action than their US peers.

“It looks like the belief that seems to have taken hold since 2021 suggesting that the finance sector can do the heavy lifting on net-zero without significant government intervention is starting to wane. The upcoming COP28 conference will be an important moment in determining how (and how much) governments want to drive progress toward net-zero.”