The world’s 15 largest asset managers, with a collective $37 trillion (€33.6 trillion) in assets, are failing to drive forward the transition needed to support the Paris climate targets, a report has claimed.
The firms, including BlackRock, Vanguard, and State Street, were found to be between 16% and 21% deviated from the objectives set by the Paris Agreement.
Thinktank InfluenceMap, which carried out the study, said this implies they are overweight in companies deploying ‘brown’ technologies (i.e, non-green), and underweight in those deploying green technologies. The market average for deviating from the targets was 18%.
Although fund managers like BlackRock, Vanguard and State Street call on companies to consider climate risks, they do not drive behaviour around climate models or policy lobbying, according to the report.
Only three of the biggest asset managers (Allianz, Legal & General Investment Management, and UBS Asset Management) strongly and consistently engage with the companies they invest in to align their business models with the Paris targets, while European firms Axa Investment Managers and Credit Agricole are close behind.
Thomas O’Neill, research director of InfluenceMap, said: "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."
A spokesperson for Vanguard said the firm is concerned about the long-term impact of climate change.
“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,” the spokesperson told Funds Europe.
Vanguard has engaged with around 250 companies in carbon intensive industries to discuss governance and disclosure of climate risk this proxy year, according to the firm.
State Street Global Advisors said it has focused on climate-related issues for many years.
“As one of the largest asset managers in the world, we are very aware of our unique position and responsibility to combat climate change,” a spokesperson said.
“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.”
The spokesperson added: “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.”
According to BlackRock, it is an error to judge an asset manager’s stewardship by its voting alone.
The firm has engaged 370 companies globally on the topic of climate risk over the last two years – more than five times the number of climate-related shareholder proposals that came to a vote over the same period, it said.
A spokesperson said: “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.”
The report also singled out JP Morgan Chase, Morgan Stanley, Goldman Sachs, and TD Bank for not doing enough to drive company behaviour change.
US fund managers recently spoke out in response to a separate report that claimed they are “overwhelmingly” blocking pro-climate proposals.
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