Asset managers lack ambition on climate, nature: NGO

Asset managers have "inadequate" emissions reduction and biodiversity targets and are stalling the energy transition to renewables by not investing enough in decarbonisation opportunities, a report from non-governmental organisation (NGO) ShareAction found today.

ShareAction compiled the report using answers provided by 77 of the world's largest asset managers — which collectively hold over $77 trillion in assets under management — to more than 100 questions. It is released as the UN Framework Convention on Climate Change (UNFCCC) launches two weeks of climate talks in Bonn, Germany — with climate financing high on the agenda.

Alhough almost all asset managers now have a long-term net zero target, they need "stronger and more comprehensive interim net-zero targets" that match the Paris climate agreement goals, the report found. Of the managers surveyed, 82pc have pledged to reach net zero carbon emissions from their investments by 2050 or sooner.

ShareAction cited "incomplete coverage of assets and scope 3 emissions" as contributing to insufficient interim goals. Of the asset managers questioned, just 8pc said that they measured and set targets using portfolio scope 3 carbon emissions, the NGO said. And of the managers surveyed, interim targets have been set for just a quarter of their combined assets under management.

Asset managers continue to invest in oil and gas expansion, while just ten have committed to restrict investment in "the most harmful fossil fuels" across all their funds, the report found. The ten asset managers are all European. ShareAction defines the most harmful fossil fuels as coal and unconventional oil and gas — such as fracking, tar sands oil or Arctic oil. ShareAction noted that, of firms surveyed, 77pc had some restrictions on coal and 62pc some restrictions on unconventional oil and gas, though the proportion of funds this covered varied widely.

But managers reported increasing engagement with companies about their decarbonisation strategies, the report found.

Biodiversity crisis

Climate and biodiversity, although scientifically linked, are often tackled as separate issues with different legislation. But "business and finance have not yet acknowledged that biodiversity loss is as important as climate change", ShareAction said. It found few commitments and "inadequate" risk assessments on biodiversity, and a "considerably weaker" response to the issue than to that of climate change.

Of the institutions questioned, 27pc had made commitments related to protecting ecosystems from deforestation, but none had taken any steps to avoid other forms of damage to natural habitats, such as ocean pollution, ShareAction said.

By Georgia Gratton