Forty-five of the world’s largest fund managers have not made significant progress on climate goals since 2021, despite an increase in climate targets through global initiatives, according to a new report by FinanceMap.
The FinanceMap report assessed the fund managers’ equity portfolios, stewardship, and sustainable finance policy engagement activities.
The assessment found that the asset management group continues to hold equity investment portfolios misaligned with the goals of the Paris Agreement, and that it has also failed to show “active and effective support” for climate finance policy required to enable decarbonization pathways.
The report highlighted that the ambition of U.S. asset managers, in particular, appears to have decreased, reversing an upwards trend up until 2022.
FinanceMap analyzed $16.4 trillion of the asset managers’ equity fund portfolios and found that 95% were misaligned with the goals of the Paris Agreement, and that the asset managers collectively hold 2.8 times more equity value in fossil fuel production companies than in green investments in the assessed sample.
A number of smaller, European asset managers’ portfolios were cited as “appearing” to outperform their peers, with Natixis and Schroders receiving positive Portfolio Paris Alignment scores, and Schroders and BNP Paribas Asset Management both having 2.7 times higher exposure to green investments than the average asset manager.
This contrasts with the large U.S. and Japanese asset managers, which were recorded as continuing to demonstrate below average alignment scores.
The report also found that the percentage of asset managers achieving a FinanceMap stewardship score in the A band had decreased from 33% in 2021 to 18% in 2023.
Legal & General Investment Management (LGIM), UBS Asset Management, and BNP Paribas Asset Management were cited as having the most robust climate stewardship.
However, the big four U.S. asset managers BlackRock, Vanguard, Fidelity Investments, and State Street Global Advisors (SSGA) received a FinanceMap Stewardship Score of C+ or lower, indicating “a lack of effective climate stewardship processes and use of shareholder authority to engage companies to transition.”
“Stewardship efforts appear to have stagnated, contributing to continuously climate-misaligned portfolios, while policy support is largely absent,” the report stated. “To bridge this gap in the immediate term, firms can disclose and review their industry association memberships to ensure these are aligned with their climate goals, and increase support for ambitious sustainable finance policy.”