The majority of global asset owners are 'failing' to invest in a way that will protect climate, biodiversity and people, according to a new report.
Responsible investment charity ShareAction writes in its Point of No Returns 2023 report, which was published yesterday, that two-thirds of 77 asset managers surveyed - which control $60trn of assets - have “serious gaps” in their responsible investment policies and practices.
The report assessed the largest asset managers in Europe, US and Asia Pacific on whether their investment policies met basic responsible criteria, including on climate, biodiversity, social, governance and stewardship.
ShareAction then ranked the managers from best (AAA) to worst (E) in a league table.
Asset management giants BlackRock, Vanguard, Fidelity Investments and State Street Global Advisors, which control over $23trn in assets combined, all scored poorly in the report, receiving either grade D or E.
Vanguard received the lowest score of all respondents in the three thematic sections (climate biodiversity and social issues) combined.
Claudia Gray, ShareAction’s head of financial sector research, said: “As managers of tens of trillions of dollars, and investors in the biggest companies from many industries, their decisions have a vast impact all over the world.
“They should be considering their effects on our climate, the ecosystems providing our life-support systems, and human wellbeing worldwide. These problems create real risks for the big companies and their investors, but as our research has uncovered, there remains a lack of ambition to drive real-world improvements.”
Asset managers hit back
In response to the finding of the report, a spokesperson from Vanguard said that the UK investor does “evaluate the implications of financially material risks, including environmental and social risks, on long-term portfolio performance across Vanguard’s line-up of high-quality, low-cost funds."
A spokesperson from BlackRock said that the premise of ShareAction’s report doesn’t consider that “clients invest with BlackRock in pursuit of their long-term financial goals” and the US investment company’s role is to help them achieve these goals.
Net Zero Investor also contacted Fidelity Investments and State Street Global Advisors for comments, but they had not responded by the time of publication.
Recent Vanguard criticism
The report comes only days after the boss of Vanguard hit back at critics over the company’s decision to abandon the Net Zero Asset Managers initiative at the end of last year.
Tim Buckley (above) stressed that, despite some media outlets reporting so, Vanguard has not changed the way it plans to tackle climate issues and related risks, and its main focus is still firmly on disclosure standards.
He explained the reason to walk away from the alliance was primarily because Vanguard’s “voice was simply being drowned out or confused” within the climate change group, which comprises of players from across the financial services spectrum.
We did see some surprising and inspiring green shoots of progress, with some well-known names making significant improvements, and European asset managers in general leading the pack.
Geographical split
The report also found that European asset managers “vastly outperformed” their regional rivals in the US and Asia Pacific. Also, US managers received the worst grades more than three times as frequently as their European rivals.
The report is the latest in a biennial series from the charity, it found that the portion of managers performing significantly worse than their peers has fallen since its last report, from 51% in 2020 to 35% in 2023.
The research also found that five asset managers, Deka Investment, JP Morgan Asset Management, Santander Asset Management, SEB Investment Management and T.Rowe Price, improved by more than 30 places since the last report in 2020.
“We did see some surprising and inspiring green shoots of progress, with some well-known names making significant improvements, and European asset managers in general leading the pack. But as global standards remain so low, almost every asset manager needs a jolt to the system,” Gray added.
Only four asset managers, Robeco, BNP Paribas, Aviva and Legal & General, received the highest ranking in ShareAction’s report.
