The majority of large asset managers globally are "not investing responsibly" and must do more to ensure their investments protect the environment, including climate and biodiversity, non-profit organisation ShareAction found in its latest report.
The report ranked 77 of the world's largest asset managers on whether their investment policies meet "basic responsible criteria, including on climate, biodiversity, social, governance and stewardship", ShareAction said. The financial institutions covered had more than $77 trillion in assets under management at the end of 2020.
Asset managers were assigned a score across five sections — responsible investment governance, stewardship, climate change, biodiversity and social issues. Climate change made up 25pc of the score weighting, and just two organisations received a score between 75-87.5pc in that segment. None of the institutions surveyed scored more highly and the majority scored below 62.5pc in the climate section.
ShareAction used publicly available information as well as direct responses to a survey, which 83pc of the managers provided. Of the asset managers surveyed, just four — Robeco, BNP Paribas, Aviva Investors and Legal and General IM — were given a ranking of "AA" or "A", while none attained the highest "AAA" score. The proportion of managers given the lowest "D" or "E" grade stood at 35pc, although this is an improvement of 16 percentage points on a comparable report made in 2020, ShareAction found.
European asset managers scored significantly better than US or Asia-Pacific institutions, filling every spot in the ranking's top 10. "The European regulatory environment is likely having a positive impact on the responsible investment performance of European asset managers relative to other regions," the report found.
Asset managers should explicitly cover climate, biodiversity and social issues in their investment policies. They should make "ambitious commitments" and develop transition plans so that all portfolios are aligned with the Paris climate agreement and a 1.5°C global warming scenario, ShareAction recommended. Policymakers should introduce mandatory reporting, in line with the Task Force on Climate-related Financial Disclosures, and ensure that regulators have a clear mandate "to supervise and, where necessary, penalise performance on responsible investment practices", the report said.
The global financial sector is drawing increased scrutiny as efforts to address climate change ramp up. Policymakers and organisations including the UN have called for more private-sector finance to be directed towards decarbonisation and measures to tackle global warming, as well as for curbs on fossil fuel financing.
