US fund managers at bottom of the pile as investors score low on climate goals

US fund managers are still lagging behind their European peers in putting pressure on companies and ensuring their investments align with climate change targets, a new report has claimed.

However, despite better performances in some parts of the world, fund managers have overall still not yet aligned their portfolios with the 2015 Paris Agreement on climate change.

The claims come in an analysis of 30 of the world’s largest fund managers, who hold 50 trillion dollars (£37 trillion) in assets.

“Given the huge influence these asset managers have over the global economy, it is vital they take action to ensure the world can meet the climate goals of the Paris Agreement,” said Dylan Tanner, executive director at InfluenceMap, which carried out the study.

“However, this latest report shows most asset managers are still moving too slowly when it comes to using their clout to drive change in investee companies.”

Asset managers at UK-based Legal & General, France’s BNP Paribas and Swiss bank UBS were all given A-ratings on their scorecard.

However, across the pond, BlackRock – the world’s biggest asset manager – scored a B, an improvement from last year.

Many of its US rivals fared worse, with Vanguard scoring a C, State Street Global Advisers hitting B-, and Fidelity Investments only managing to get a D score.

It shows a major gap between the US investors and their European counterparts in the pressure they put on companies to ensure they are Paris-aligned.

BlackRock, for instance, only voted in favour of 24% of what InfluenceMap called “crucial, market guiding climate-related shareholder resolutions” in 2020.

Investors, especially major institutions, can form a key part of ensuring that companies tighten up their climate ambitions, among other things.

The Church of England Pensions Board, a major investor, was an influential supporter of Climate Action 100+ and helped pressure oil major BP towards ensuring it set better climate targets.

BP has since set ambitious new targets of becoming emissions neutral by the middle of the century.

The oil major’s commitment has been echoed by Anglo-Dutch rival Shell but many of their US counterparts have not shown any major willingness to move on climate change.

Mr Tanner said: “This report highlights the need for US asset managers to step up and take stronger action – especially given their market dominance and unique ability to send a clear signal to the rest of the economy.”

Including climate change considerations in any company plans is not just an issue of fighting global warming for the sake of the common good, it also ensures that companies are not left with millions, if not billions, of pounds trapped in so-called stranded assets.

These include oil that cannot be removed from the ground because laws have changed, or demand has reduced.