The beginning of 2020 marks the end of the world’s hottest decade in recorded history, and research suggests that capital market assets are already losing in value as a result of climate change. Markets continue to misprice climate-related risks. It is in this context that ShareAction releases this assessment of the asset management industry’s response to climate change, based on comprehensive data collected from 75 of the world’s largest asset managers that collectively hold over US$56 trillion in assets under management. It follows the publication of the ranking of the surveyed companies, released as part of the first Point of No Returns report discussing asset managers’ approach to responsible investment governance. An equivalent ShareAction report on Biodiversity has also been released.
This analysis indicates that despite a rising awareness of climate change as a financial risk, the overall picture is largely one of insufficient progress from the industry’s most influential players. It finds that just over half of the assessed asset managers include climate change in their policies and only a small percentage make specific commitments relating to portfolio decarbonisation.The focus of asset managers’ engagement with companies remains firmly on the disclosure of climate-related data, with fewer investors concentrating their stewardship efforts around corporate strategy alignment with the goals of the Paris Agreement and the setting of climate-related targets. The assessment of portfolio climate alignment is also rarely used to inform investment and engagement strategies.
The key messages from this report can be summarised in 5 points:
COVID-19 has thrown a spotlight on companies’ treatment of low-paid workers. Many such workers still lack the social protections, such as sick pay or medical benefits, which are essential if they become ill.
This interim report of the High-Level Expert Group on Sustainable Finance (HLEG) of the European Commission identifies two imperatives for Europe’s financial system.