38 out of 75 of the world’s largest asset managers, with greater assets under management than the GDP of the US and China combined, are stalling on taking action on environmental, social and governance issues, according to new research released today. The latest ranking by responsible investment organisation ShareAction raises doubts about whether 38 asset managers globally – managing assets worth more than $36 trillion – are taking responsibility for their footprint on society and the environment. The research finds these asset managers, which fall in the bottom two categories of the ranking (D and E), have weak or non-existent policy commitments and fail to account for their real-world impacts across their mainstream assets. They also often lack appropriate engagement and escalation processes on climate change, human rights, and biodiversity.
ShareAction further reveals that the world’s six largest asset management firms, with the combined assets under management of over $20 trillion, have a very limited approach to managing ESG risks and opportunities, exposing millions of savers worldwide to potential financial losses in the long term. All six of the largest asset managers in the study – BlackRock, Vanguard, State Street, Fidelity Investments, Capital Group, and JP Morgan Asset Management – are US-based and rank in the bottom two bands (D and E).
In the first analysis of its kind, ShareAction, which recently filed a climate shareholder resolution at Barclays, has reviewed the responsible investment practices in respect of governance, climate change, human and labour rights, and biodiversity of 75 of the world’s largest asset managers. Based on data collected through an extensive, TCFD-aligned survey, as well as publicly available information, the first in the series of three reports gives an overview of global trends in the adoption of responsible investment practices within the industry. It ranks asset managers based on disclosure and management of ESG risks and impacts across their portfolios. All asset managers responded to the survey, with the exception of Bradesco Asset Management, E Fund Management, Fidelity Investments, JP Morgan Asset Management, PGGM, and SEB.
Results show that some asset managers – such as Robeco (which ranks first), BNP Paribas Asset Management, LGIM, APG, and Aviva – are showing real leadership and are a positive exception. However, none of the assessed managers demonstrates a best practice approach across all of the responsible investment themes and, therefore, none qualified for AAA or AA rating, the top two scores.
The number of poor performers in the ranking is particularly concerning as all of the asset managers included are members of the PRI and 75% have joined Climate Action 100+, yet many fail to translate these public commitments into strong action on stewardship and wider ESG integration.
The analysis also reveals big differences between regional markets. The majority of European asset managers generally outpace their peers in other regions, with most of the US-based investors far behind the curve. Within Europe, the Netherlands shows particularly strong performance, leading against France, with the UK behind its French peers. The five largest Japanese asset managers included in the ranking generally perform better than their US counterparts and outperform their peers in Asia Pacific, showing that Japan has strong potential for becoming a progressive force for responsible investment in the region.
All participants are given recommendations and detailed feedback on their performance with the aim of improving practice over time.
Data was taken in October 2019. We welcome any progress asset managers have made since then.
The top 10
Felix Nagrawala, ShareAction Senior Analyst, says: “ShareAction’s most ambitious study yet reveals who is really walking the talk on environmental and social issues, and who is dragging their feet in the asset management space. While many in the industry are eager to promote their ESG credentials, our analysis clearly indicates that few of the world’s largest asset managers can lay claim to having a truly sustainable approach across all their investments. Because the power of the global asset management sector relies on the money put into the system by millions of savers worldwide, the findings of our study are just as salient for ordinary people as they are for the industry. Through the decisions they make every day, asset managers shape the world around us, and the world into which we retire, yet they are failing to drive the change we urgently need. It is imperative that they start to account for the real-world impacts of their investments and step up to meet the challenges of the social and environmental crises we are now facing.”
Carola van Lamoen, Head of Active Ownership at Robeco, says: “We are extremely proud to be recognised as a sector leader in ShareAction’s assessment. Robeco’s place at the top of the leaderboard reflects our long-standing history in this field, and our commitment to driving positive change through rigorous stewardship and focus on ESG integration. We acknowledge that in order to truly meet the challenges in the world, industry standards must be raised across the sector. We hope this ranking will propel the industry into action as we continue to play our role in educating and sharing best practices.”
Luba Nikulina, Willis Towers Watson’s Global Head of Research, says: “While it is positive to see leaders in this ranking taking affirmative action on systemic ESG risks, this ranking by ShareAction helps demonstrate just how much progress needs to be made by the industry. We welcome this research, which will serve as a valuable tool for asset owners looking to ask tough questions of asset managers. It is hard to see how managers failing to take suitable action will be able to meet the needs of their present and future clients as they seek more ESG-aware stewards of their assets. This is why we are working closely with asset managers in 2020 to help deliver investment solutions that are consistent with a sustainable world.”