Asset managers failing to combat crises

The ‘Point of no returns’ report surveyed 77 major asset managers with $77tn (£64tn) of assets under management, and ranked their performance in a league table. 

None of the managers were awarded a triple A grade. Only four received a double A or A grade. In ranking order, they were: Robeco, BNP Paribas Asset Management, Aviva Investors, and Legal & General Investment Management.

Two-thirds of the managers surveyed – handling $60tn in assets – received a score of triple C or worse, which, according to the report’s authors, indicates serious gaps in their responsible investment policies and practices for at least one of the categories analysed. 

Top of the class

The top performer was Robeco, which achieved the only double A grade, scoring the highest scores for governance and stewardship, and placed in the top six in all three thematic sections: climate, biodiversity and social issues. 

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

Claudia Gray, ShareAction

BNP Paribas AM also placed in the top 10 managers in all five sections, and achieved the highest combined score across the three thematic sections. 

Five other asset managers – Aviva Investors, Axa Investment Managers, LGIM, Schroders and Swedbank Robur – also scored consistently well and were in the top 25 managers in each section.

ShareAction head of financial sector research Claudia Gray said: “A majority of the world’s largest asset managers are failing to meet even basic criteria, let alone take the steps needed to help protect people and the planet for generations to come.

“The impact of the decisions these asset managers make cannot be understated. 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.”

Low scores from the biggest managers

The world’s four biggest asset managers – BlackRock, Vanguard, Fidelity Investments and State Street Global Advisors – all scored poorly, receiving either D or E grades, meaning those managers with the greatest influence are coming worst in class.

A BlackRock spokesperson commented: “The premise of the report does not take into account the fact that our clients invest with BlackRock in pursuit of their long-term financial goals and that, as stewards of their assets, our role is to help them achieve these goals.”

Six of the respondents were outside the top 50 in every category.

“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,” said Gray.

“But as global standards remain so low, almost every asset manager needs a jolt to the system. We are running out of time to act on these global problems if we want to avoid catastrophes.”

Among those green shoots were the responses from Santander Asset Management and JPMorgan Asset Management, which jumped up the rankings since ShareAction’s last report in 2020, partly as a result of adopting frameworks for their climate-related investments. 

Not all plain sailing 

The report sets out a series of recommendations for asset managers, asking them to identify, manage and report on the real-world impacts of investment decisions on sustainability issues, including climate, biodiversity and social issues.

ShareAction is also urging asset owners to use their influence to hold asset managers to account, and policymakers to introduce regulation that improves minimum standards across the entire industry.

Gray acknowledged there are considerable political challenges and regulatory differences between the US and Europe, where managers scored better overall. 

“The difference in political context is providing a challenge for some of the large US asset managers,” she told Pensions Expert.

“Having said that, we would still prefer them to step up their game. That will depend on asset owners sending a very clear statement that they expect these matters to be considered for their mandates. 

“We do need other players in our context to step up to the conversation. We don’t want to get our pensions back and then discover that we don’t have a world that we can spend them in.”

Much room for improvement

The robust policies of the four highest-ranking asset managers – Robeco, BNP Paribas, Aviva and L&G – show that investing can be both responsible and profitable, even for those managers of a considerable size, the report said. 

But the fact that none of the managers are scoring top marks shows that they have a lot of work still to do, Gray said. She added that the biggest blindspot is biodiversity, though the Taskforce on Nature Related Financial Disclosures is likely to change that position rapidly, just as the Task Force on Climate-related Financial Disclosures did for climate change. 

The report includes recommendations for asset owners and investment consultants, but it urges asset managers to focus on some key targets.

It urges managers to identify, manage and report on the real-world impacts of investment decisions on sustainability issues, including climate, biodiversity and social issues. Responsible investment policies should be strengthened and aligned with the Paris agreement and a 1.5C target. 

They bring awareness of where managers are lacking in certain areas, so that we can start to question where those gaps exist and how they’re being addressed

Sarita Gosrani, Bfinance

Passive asset managers are tasked with directing inflows of capital towards funds that align with the goals of responsible investment and to improve their investor education and index engagement, developing new indices if necessary.

Proactive stewardship is also urged to foster positive change, with a heavy emphasis on passive managers raising their game in this area. Those heavily exposed to fixed income must ensure their engagement with issuers of corporate debt is aligned with responsible investment policies.

More joined-up thinking required

Sarita Gosrani, director of ESG and responsible investment at consultant Bfinance, noted that reports like this are helpful by providing an overview. 

“They bring awareness of where managers are lacking in certain areas, so that we can start to question where those gaps exist and how they’re being addressed,” she said.

A lack of data is no longer a valid excuse for Gosrani, as managers should expect to constantly improve data capture and to report on its development regularly to asset owners. 

She also sees huge gaps in alignment between what investment managers say is being done and what the overarching organisation is doing.

Speaking of a recent piece of research, she said: “While I found some very good strategies that are trying to implement a policy at asset class level, they were trying to do it without having an overarching house policy. 

“For instance, if you are trying to execute a biodiversity or social policy, how can you do that if there is not a biodiversity or social policy at firm level and still hope to be successful?”