US asset managers are lagging their European counterparts when it comes to engaging with companies to drive behavioural change and meeting climate targets.
Research by charity group ShareAction reveals that many US fund groups are reluctant to use their clout to challenge companies on important issues such as climate change. Despite committing to action on climate change, asset managers are often not using their vote at AGMs to pressure businesses to behave better.
The results are highly concerning, says ShareAction, given that the 20 largest US fund groups account for around 35% of assets globally.
“You can’t boast climate-awareness in public and block climate goals in private,” says Jeanne Martin, campaign manager at ShareAction and author of the report. “Ultimately, these investors will be judged on their voting, which is the most powerful tool at their disposal. They have the power to put the brakes on the climate emergency, but they’re on autopilot, driving us head-on into it.”
The report looked at the votes of 57 of the world’s largest asset management groups across 65 proposals, including emissions targets, climate reporting, and governance and corporate lobbying.
All too often it seems US asset managers are talking the talk but not walking the walk: 17 out of 18 European asset managers studied supported more resolutions than even the most engaged US firms, according to ShareAction’s research. It said some of these firms were more likely to side with company management rather than use their power to force change.
It found that Capital Group, which manages an eye-watering $1.9 trillion of assets, had supported fewer than 5% of climate proposals analysed and T. Rowe Price just 5.3%. BlackRock and JPMorgan Asset Management were also among the least engaged firms, each supporting just 6.7% of proposals analysed by ShareAction.
The worst 10 firms for engagement, according to the research, are all US asset management groups and six of them – BlackRock, JPMorgan, Fidelity International, Wellington Management International, Northern Trust and State Street Global Adviser – have actually publicly supported the Taskforce for Climate-related Financial Disclosures (TCFD) and joined at least one investor engagement initiative on climate change.
But despite their public pledges, these firms are often failing to back resolutions on climate-related disclosures at company meetings.
Europe Leads the Way
Conversely, the most responsible firms, as defined by the report, are all based in Europe: UBS Asset Management supported more than 90% of the resolutions in the study, Allianz Global Investors 88.5% and Aviva Investors 86.9%. Also, among the most proactive firms were L&G Investment Management, HSBC Asset Management and AXA Investment Managers.
Michael Baldinger, head of sustainable and impact investing at UBS Asset Management, says that over the past 18 months the firm has been deepening its engagement with companies to drive positive change toward a low carbon economy: “We expect companies to have a strategy for reducing greenhouse gas emissions, to be clear about goals, and to report on progress.”
The willingness of European businesses to engage on climate issues may well be driven by investor demand for sustainable funds. Morningstar Direct data shows that 40% of European fund inflows year to date have gone into sustainable funds, bringing total assets to £540 billion. Sustainable fund assets grew at a rate of 6% in the third quarter of this year, compared with just 2.6% across European fund assets generally.
Hortense Bioy, European head of sustainable research at Morningstar, says this strong demand is leading to a wider range of products available to investors: “The range of options for climate-conscious investors is growing – at least nine new products that came to market in the third quarter have a specific climate change or energy transition-related mandate.”
