Wednesday 02 October 2019 12:01 am | Updated: Tuesday 01 October 2019 3:10 pm

Some of world’s biggest asset managers ‘paying lip service’ to ESG

BANNING, CA – DECEMBER 8: Emissions-producing diesel trucks and cars pass non-polluting windmills along the 10 freeway on December 8, 2009 near Banning, California. Sustained global warming shows no sign of letting up according to new analysis by the World Meteorological Organization made public at the climate talks in Copenhagen. Although global temperature fluctuates from year to year, overall the decade of the 2000s is likely the warmest decade in the past 150 years covered by the report. This decade is warmer than the 1990s which were warmer than the 1980s, and so on. The conclusion meshes with independent analysis by the National Climatic Data Center and NASA. (Photo by David McNew/Getty Images)

There is a “significant discrepancy” between the pledges made by the world’s 50 largest asset managers on environmental, social and governance (ESG) and the action managers have actually taken on these issues, new research has found.

Although the vast majority of the world’s 50 biggest asset managers – who manage a combined $50.6 trillion (£41.3 trillion) – are signatories of the United Nations Principles of Responsible Investment (PRI), the total amount of money actually invested sustainably is lagging well behind.

While 96 per cent of the top asset managers are PRI signatories, a total of $30.7 trillion is invested globally under benchmark sustainability definitions, according to a report published today by Squarewell Partners.

The PRI is a pledge investors can sign committing to six principles, but does not outline specific targets. The report said the discrepancy could indicate an issue with “signatories not
following the principles they signed up to”.

Squarewell partner Edouard Dubois told City A.M. that although many investors and asset managers had signed the PRI since it was launched in 2006, “many were just paying lip service to it”.

Dubois said in recent years, investors had become more concerned about ESG matters and had begun pressing asset managers to take action.

“There has always been an element of greenwashing [where disclosures around sustainability do not match actions taken], but fortunately asset owners are really probing asset managers much more.”

Research published last month found that some funds marketed as climate conscious, including some explicitly described as “fossil fuel reserves free” in fact had exposure to to fossil fuels.

As well as channelling their cash into ESG funds, the research found that investors are also pushing asset managers to develop their stewardship teams. Almost three quarters (74 per cent) of the top 50 asset managers have dedicated ESG stewardship teams, while 38 per cent have introduced a section on ESG issues to their voting policy.

Dubois said that while “there is a very positive momentum on both the investor and corporate sides”, a “common language” needed to be developed between the two on ESG issues. “We haven’t found a lingua franca yet,” he said.

The report also found that asset managers are becoming more vocal. Over a quarter (26 per cent) of managers covered in the research had publicly expressed their discontent with a portfolio company since the start of last year.

Main image credit: Getty