Asset owners speak of ‘inflection point’ in engaging corporates on climate
How far can asset owners push their companies in implementing an ambitious net zero agenda? Panellists at a conference in Paris agreed there are limits
How far asset owners and managers can push their net zero agenda is reaching a critical “inflection point” as climate action faces short-term financial realities. That was the message from an investment heavyweight at a conference in Paris earlier this week.
Hilkka Komulainen, head of responsible investment at pensions and asset management firm Aegon UK, pointed out that the Net Zero Asset Owner Alliance (NZAOA), of which Aegon is a member, has previously published material underlining the limits to corporate engagement and the need for asset owners to explore other avenues of influence.
“We're at an inflection point when it comes to investors and climate change, and how much it is that we can deal with emissions that are increasing faster from profitable firms. I think it's very challenging”, she told delegates.
The comments were made during a panel discussion of NZAOA members on the topic of engaging with asset managers on climate lobbying at Climate Action’s yearly European sustainable investment forum, hosted in Paris for the first time since 2019.
How much it is that we can deal with emissions that are increasing faster from profitable firms is very challenging.
The panel came in the midst of the ongoing AGM season in which climate disclosure resolutions have been a central talking point, yet often failed to gather the expected momentum.
Of the current AGM season, and its relationship to climate lobbying, Udo Riese, head of sustainable investing at Allianz Investment Management, told the conference attendees: “We work with several asset managers on the listed side. We deep dive into single votes and compare the rationale behind them.
“One trend we see is some large asset managers stepping a little bit back in the US, for all different reasons. We also see that the topic of transparency and consistency on lobbying comes more and more into the votes and internally in general meetings.”
Of the last AGM season, Vanguard, Fidelity, BlackRock and State Street all backed fewer environmental shareholder resolutions in 2022 compared to 2021.
The topic of transparency and consistency on lobbying comes more and more into the votes.
SFDR woes
The increased stringency of the EU’s (SFDR) from the beginning of the year led to a flurry of downgrades from Article 9 (impact) funds to Article 8, describing funds of a more general ESG-linked nature.
Of how this move has impacted SFDR, Joël Prohin, head of investment management at French public sector financial institution Caisse des Depots, said: “At the beginning of SFDR, everybody wanted to do put the maximum of funds in the bucket of Article 9. Now everybody is scared and so going back [to Article 8], but there is no point to SFDR if all the funds are there and there is nothing in Article 9.”
There has also been concerns raised that SFDR has defaulted into the position of a ‘de facto labelling regime’, in comparison to the UK’s upcoming dedicated labelling scheme the Sustainability Disclosure Requirements.
