Asset managers found to have ‘blind spot’ around new ESG risk
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There is evidence that corporations and those funding them have contributed to the destruction of the world’s natural resources.
PHOTO: REUTERS
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LONDON – The asset management industry is overlooking what promises to be a major new environmental, social and governance (ESG) risk: biodiversity.
A fresh analysis by non-profit ShareAction found that only 10 per cent of the asset managers it surveyed say they have a dedicated biodiversity policy covering all their portfolios.
“Even the top-performing asset managers in the survey have a biodiversity blind spot, often failing to take into account the protection of important habitats such as forests, rivers and oceans when managing their investments,” said Dr Claudia Gray, head of financial sector research at ShareAction.
The study, which looked at companies representing a combined US$77 trillion (S$104 trillion) in client assets, comes roughly two months after the United Nations COP15 biodiversity conference put biodiversity firmly on the investing map.
For now, very few asset managers are meeting the moment. ShareAction found that 40 per cent of the firms it surveyed do not monitor whether investee companies operate in areas of global biodiversity importance. A fifth of them monitor the metric, but do not impose any restrictions.
Meanwhile, there is evidence that corporations and those funding them have contributed to the destruction of the world’s natural resources, with animal populations dropping by an estimated 69 per cent since 1970.
ShareAction found that 34 per cent of the asset managers it surveyed said biodiversity is included in their general responsible investing policy. At the same time, hardly any investments target biodiversity, according to a separate report by Morningstar. The researcher identified only 14 funds with US$1.6 billion of combined assets that have strategies based on biodiversity, in a December report.
Overall, the asset management industry continues to trail on ESG metrics, the ShareAction survey found. Fidelity Investments and Vanguard Group are among firms at the bottom of its ranking, which measured performance on climate, biodiversity, social and corporate governance issues, as well as stewardship standards.
A spokesman for Vanguard said the company has a “singular focus on client outcomes” and it evaluates “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”.
For those wanting to invest in line with their ESG preferences, Vanguard offers ESG index and active funds with different ESG strategies, the spokesman added.
Fidelity officials were not immediately available to comment.
Across the wider industry, firms are “typically doing nowhere near enough to address the most dangerous human and natural crises of our time”, ShareAction said.
It added: “We are running out of time to act on these global problems if we want to avoid catastrophes.”
ShareAction said European asset managers significantly outperform their counterparts in the United States and Asia. Robeco, a Dutch asset management firm owned by Orix, earned the highest score, followed by BNP Paribas Asset Management, Aviva Investors and Legal & General Investment Management.
The results “show that investing can be both responsible and profitable, even for those managers of a considerable size”, ShareAction said.
The non-profit, which has coordinated climate change and nature-related shareholder resolutions at companies from Barclays to Glencore and Tesco, said there are also some “surprising and inspiring green shoots of progress”.
These include significant improvements compared with 2020 in the rankings of the asset management unit of JPMorgan Chase, it said. Its higher ranking in the latest survey follows the firm’s adoption of better investing frameworks for climate-related investments, ShareAction said.
BlackRock, the world’s biggest money manager, is among firms in the second-lowest category, as are Capital Group, State Street Global Advisors and Franklin Templeton. BLOOMBERG
