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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Asset managers not doing enough to reduce emissions

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With global warming being such a major issue, it appears only a handful of smaller UK and US companies are putting in most of the effort to reduce carbon emissions, despite increasing pressure from activists. Asset managers overseeing $37tn are failing to force carbon-heavy companies to meet global targets for reducing emission. Some of the effort is coming from regulators, such as the Bank of England’s governor Mark Carney. But the screws are also being tightened by investors. Sir Chris Hohn’s activist hedge fund TCI wrote to several companies demanding they disclose their carbon dioxide emissions and outline their plans to reduce their carbon footprint.


According to a report by InfluenceMap, the UK-based think-tank, investment portfolios held by some of the world’s largest asset managers, including BlackRock, Vanguard and State Street, “remain significantly misaligned” with climate-change goals set by world leaders in Paris in 2015. The most ambitious goal of the Paris agreement was to keep the rise in global temperature well below 2 degrees Celsius above pre-industrial levels and aim for 1.5C. But InfluenceMap’s analysis of 50,000 investment funds found little exposure to companies across the oil and gas, automotive, electric power and coal industries that are deploying green technology to limit their impact on the environment.


Allianz Global Investors, Legal & General Investment Management and UBS Asset Management are the only asset managers that “strongly and consistently engage” with companies to align their business models with the Paris targets, according to the report. This includes pushing corporate transitions to low-carbon technologies and getting companies to align their lobbying with the Paris accord. Conversely BlackRock and Vanguard — the world’s two largest assets managers — State Street, Goldman Sachs, JP Morgan, Morgan Stanley and TD Bank were singled out for calling on companies to consider climate risks but not driving “behaviour change around climate models or policy lobbying”.


Fidelity Investments and Capital Group had “very limited engagement with companies on climate”, according to the report. The think-tank said five smaller US and UK managers — Hermes Investment Management, Sarasin & Partners, Trillium Asset Management, Walden Asset management and Zevin Asset Management — were doing the “heavy lifting” for the investment industry, filling 20 per cent of all climate resolutions in 2018.


BlackRock said in a statement: “BlackRock has the largest stewardship team in the world, and engaged 370 companies globally on the topic of climate risk in the past two years, more than five times the number of climate-related shareholder proposals that came to a vote over the same period, we put a priority on engaging with a company on addressing climate-related issues even in the absence of shareholder proposals.”


Vanguard said: “We are taking action to address climate change through our company engagements and industry advocacy efforts with organisations and initiatives such as the Sustainability Accounting Standards Board, support for the Task Force on Climate-related Financial Disclosures, and our continued reporting via the UN PRI, among others.”


A spokesman for State Street Global Advisors, the custodian’s investment arm, said: “As an index investor, State Street Global Advisors tracks the indices of global data providers, which means that we are compelled to buy and sell holdings according to index’s composition. While we are unable to sell holdings of companies where we disagree with management, we always use our votes as shareholders who actively implement policies to promote environmental, social and governance responsibility.


Capital Group said: “We closely consider client-related shareholder resolutions. Last year alone, we conducted thousands of face-to-face meetings with companies, their suppliers, customers and regulators, to understand their businesses including how they approach ESG (environmental, social and governance) issues.”


Goldman Sachs, JP Morgan, Morgan Stanley, TD Bank and Fidelity were contacted for comment. The global asset management industry continues to talk up its ability to hold companies to account over climate change and other ESG-matters, as their pension fund clients demand action.


In his annual letter to shareholders, published always in January, BlackRock’s chief executive, Larry Fink, said the group would do more to pressure company bosses on issues including the environment this year; BlackRock voted against 90 per cent of shareholder-led climate change resolutions in 2018, InfluenceMap found.


Thomas O’Neill, research director at InfluenceMap, said asset managers “must engage robustly with companies in these sectors to accelerate their switch to low-carbon technologies and ensure their policy lobbying supports climate targets.”


(The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)


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