Report: World's largest asset managers failing to champion global climate goals
Some of the world's biggest asset management firms, including the likes of BlackRock, Goldman Sachs and Morgan Stanley, are collectively failing to drive alignment with the Paris Agreement in their business models and policy lobbying.
That is the key conclusion of a new report from non-profit InfluenceMap, which analysed how closely the portfolios of 15 of the world’s largest finance firms aligned with the Paris Agreement’s two pathways, and the ways in which these businesses have voted in climate-related resolutions and engaged in climate-related lobbying.
Called FinanceMap, the report concludes that the actions of the investors analysed – which collectively hold more than $37trn (£28.7trn) in assets under management – are collectively “at odds with the rapid transition to a low-carbon economy”.
The smallest gap between an analysed company’s actions and the Paris Agreement’s 2C pathway was 16% - from Legal and General Investment Management (LGIM) – while the largest, from Fidelity, was 21%.
Fidelity, along with Capital Group, was found by InfluenceMap to have “very limited” engagement with the companies it invests with on climate issues.
At the opposite end of the table, alongside LGIM, sit Allianz and UBS Asset Management. InfluenceMap states that its research has proven that these three firms “strongly and consistently engage with the companies they invest in to align their business models with Paris targets” and have a good history on climate-related lobbying.
In the middle of the league table sit several of the US’s largest asset managers: BlackRock, Vanguard, State Street, JP Morgan Chase, Morgan Stanley, Goldman Sachs and TD Bank. InfluenceMap found that these firms are engaging the companies they invest with on climate issues, but without using climate models such as scenario analysis in line with the Paris Agreement.
Moreover, InfluenceMap claims that the policy lobbying activities of these firms has not been compatible with the IPCC’s call for “rapid and far-reaching transition in land, energy, industry, buildings, transport and cities. BlackRock’s moves in this space have been under particular scrutiny in the media in recent months, with analysis by Ceres finding that the company only voted to back positive climate-related shareholder resolutions 10% of the time.
InfluenceMap’s report, which marks the beginning of a longer-term campaign around green finance, has gained the support of the UNFCC’s former executive secretary Christina Figueres. Responding to its findings, she said: “The asset management industry is only starting to be aligned with the Paris Agreement. In the face of the climate emergency, it is critical for investors to show companies the path to follow.”
"If global asset managers wish to support the Paris Agreement and remain invested in the automotive, power and fossil fuel industries then they must engage robustly with companies in these sectors to accelerate their switch to low carbon technologies and ensure their policy lobbying supports climate targets,” InfluenceMap’s research director Thomas O’Neill added.
edie has contacted all of the companies given an overall ranking of ‘C’ or lower by InfluenceMap, and will update this piece when they provide responses to the research’s findings.
BlackRock and Goldman Sachs have already responded, with a spokesperson for the latter saying they had nothing to add and a spokesperson for the former saying: “It would be an error to judge an asset manager’s stewardship by its voting alone. BlackRock has the largest stewardship team in the world, and engaged 370 companies globally on the topic of climate risk in the past two years, more than five times the number of climate-related shareholder proposals that came to a vote over the same period.
"As the numbers demonstrate, we put a priority on engaging with a company on addressing climate-related issues even in the absence of shareholder proposals. At the same time, we provide product choices to clients who wish to avoid specific sectors through our sustainable investing platform and invest heavily in research demonstrating the relationship between sustainability issues, risk and long-term value creation.”
In a statement sent to edie, Capital Group described itself as an "active, bottom-up investor" which has "ongoing engagements" to address ESG risks and opportunities.
“Climate is an important issue, which is why we regularly engage with boards and management as part of our analysis of companies, and we closely consider client-related shareholder resolutions," the statement read. "Last year alone, we conducted thousands of face-to-face meetings with companies, their suppliers, customers and regulators, to understand their businesses – including how they approach ESG issues.”
A spokesperson for Vanguard, meanwhile, said the firm "is concerned about the long-term impact of climate change" and emphasised its work with SASB, the TCFD, the UN PRI and the Vatican's 'Energy Transition and Care for Our Common Home' declaration. They said the company had directly engaged with 250+ companies in high-carbon sectors on sustainability in FY 2018-19.
“While voting at shareholder meetings is important, it is only one part of the larger corporate governance process," the Vanguard spokesperson continued. "We regularly engage with companies on our shareholders’ behalf and believe that engagement and broader advocacy, in addition to voting, can effect meaningful changes that generate long-term value for all shareholders. Vanguard is pursuing an engagement strategy that focuses on boards’ climate governance and oversight of climate risk or climate strategies, and on comparable and investor-relevant disclosures."
Similarly, a spokesperson for Stake Street argued that the firm has "focused on climate-related issues for many years".
The spokesperson said: "Outside of exercising our influence through voting on the companies our clients invest in; we are also working hard with some of the largest index providers in the world, to build out tools such as our proprietary ‘R-Factor’ system that improve disclosures around green and sustainable investing.
"As an index investor, State Street Global Advisors tracks the indexes of global data providers, which means that we are compelled to buy and sell holdings according to an index’s composition. While we are unable to sell holdings of companies where we disagree with management, we always use our votes as shareholders who actively implement policies to promote environmental, social and governance responsibility.”
Early signs of a sector shift
The InfluenceMap report comes after analysis from the World Resources Institute (WRI) found that just 23 of the world's largest 50 banks have outlined commitments to invest more in renewable energy and less in fossil fuels.
With these concerns beginning to become commonplace among policymakers and the general public, some finance firms are taking action. A coalition of 130 banks, representing one-third of the worldwide banking sector, committed to aligning their actions with the aims of the Paris Agreement at the recent UN Climate Action Summit in New York. The pledge was shortly followed by news that investors collectively controlling $2.4trn of assets will work to make their portfolios carbon-neutral by mid-century.