None of the world's largest asset managers has definitively called on fossil-fuel companies to stop the development of new oil and gas projects.
Surely, one would think, given all the climate-conscious talk coming from Wall Street bigwigs like BlackRock Chief Executive Officer Larry Fink, that the investment industry would be using all of its muscle to press the world's worst polluters to reduce their production of dangerous greenhouse gases. Instead, the opposite is true.
Together, 30 of the biggest asset managers have at least US$550 billion (S$748 billion) invested in oil, gas and coal companies that have expansion plans, and even more alarmingly, they continue to provide "fresh cash to companies that are ignoring climate science", said Lara Cuvelier, sustainable investment campaigner at Reclaim Finance, a non-profit which published a scorecard on Wednesday (April 20) grading investment firms on their environmental commitments.
In effect, the fund industry is "adding fuel to the fire", she said.
And this is happening against a backdrop where the world's leading climate finance experts and economists warn too much money is pouring into fossil fuels, putting the planet on track to blow past its limit to avoid catastrophic global warming.
The Reclaim Finance-led report also provides a checkup on an industry that unveiled the Glasgow Financial Alliance for Net Zero almost a year ago, when bankers and fund managers exclaimed how they're committed to helping fight climate change.
Instead, Reclaim Finance found that all 30 of the fund managers' policies and investment guidelines are "too flawed" for them to align their entire portfolios with a net-zero emissions target. The investment firms included in the survey ranged from BlackRock and Vanguard Group in the United States to Axa Investment Managers and Amundi in Europe.
- Twenty-three of the 30 firms allow investments in companies that are starting new coal projects.
- None completely restrict holding shares or bonds of companies that are involved in new oil and gas projects.
- And none are calling for companies to "immediately and progressively decrease" their overall fossil-fuel production.
- Twenty-five say they're pushing companies to improve on climate-related issues. However, case studies indicate this engagement work has thus far failed to lead to concrete changes.
- Ten of the asset managers have released 2030 decarbonisation goals, but the targets only cover a small proportion of their total portfolios and financed emissions.
- None apply their existing fossil-fuel restrictions to their index-tracking assets, which is particularly concerning given that "passive" investments keep growing and represent 46 per cent of the assets covered by the report.
(Amundi has exclusion policies for oil, gas and coal that cover less than 40 per cent of its passive assets, which is "insufficient", Cuvelier said.)
The bottom line is "leading asset managers are kicking the can down the road without even asking companies to stop worsening the climate crisis," Cuvelier said.
Reclaim Finance's research found that, while none of the 30 firms ranked very well, Natixis SA's Ostrum Asset Management and Axa Investment Managers rated the highest. Ostrum was singled out for its coal-exclusion policy and to a lesser extent for its oil and gas policy, and Axa for having a better engagement policy regarding the fossil-fuel sector than other firms, Cuvelier said.
Overall, asset managers aren't engaging companies on key climate issues to limit global warming Cuvelier said. The report calls on investors to force fossil-fuel companies to end their expansion plans.
"Let's be clear," she said. "Drilling a new oil well or opening a new coal mine isn't a normal thing to do in a widespread climate catastrophe."
