Wednesday 27 November 2019 12:01 am

Portfolios of biggest asset managers ‘misaligned’ with climate targets

The world’s largest asset managers – responsible for a collective $37 trillion (£29 trillion) –  are failing to invest in a manner that supports the goals set out in international targets on climate change, according to research released today.

The investment portfolios of the 15 biggest asset managers are “misaligned” with the goals of the Paris Agreement in “significant portions of their portfolio holdings covering the automotive, electric utilities and fossil fuel production sectors,” said Influencemap, which published the report.

Read more: Some of world’s biggest asset managers ‘paying lip service’ to ESG

The Paris Agreement outlines the target of keeping global warming well below two degrees celsius while aiming for 1.5, but top asset managers are failing to drive support for the rapid transition to a low-carbon economy needed to meet these goals, the research said.

The research used International Energy Agency scenarios to asses the roll-out of low-carbon technologies needed to limit global warming to 1.75 degrees celsius, but found asset managers’ portfolios to be “significantly misaligned” with the target.

“The asset management industry is only starting to be aligned with the Paris Agreement. In the face of the climate emergency, it is critical for investors to show companies the path to follow,” said Christiana Figueres, former head of the UN’s framework convention on climate change.

Only three of the top asset managers – Allianz, Legal & General and UBS Asset management – strongly and consistently engage with the companies they invest in to align their business models with the Paris targets, it found.

Several large US asset managers – including State Street and Vanguard – are criticised for “call[ing] on companies to consider climate risks but do not drive behavior change around climate models nor policy lobbying.”

“We are taking action to address climate change through our company engagements and industry advocacy efforts,” said a Vanguard spokesperson.

They added that Vanguard was committed “to continued monitoring, engagement, and support for constructive and long-term oriented solutions to mitigate the risks of climate change to our clients’ investment success”.

Read more: Some ‘fossil fuel free’ funds have stakes in coal companies, research finds

“We have focused on climate-related issues for many years,” said a State Street spokesperson. “As one of the largest asset managers in the world, we are very aware of our unique position and responsibility to combat climate change.”

“Outside of exercising our influence through voting on the companies our clients invest in we are also working hard with some of the largest index providers in the world to build out tools… that improve disclosures around green and sustainable investing,” they added.