The majority of asset managers lack biodiversity voting and engagement policies, ShareAction has found, although European managers are leading the way.
The financial services NGO has today published the second half of its annual Point of No Returns report, which looks at the responsible investment governance and stewardship practices of 77 of the world’s largest asset managers that collectively hold more than $77trn in assets under management. Its assessment is based on data collected from the asset managers between July and November 2022.
The first half, published last month, revealed the ranking of managers across several ESG factors, highlighting Robeco, BNP Paribas Asset Management, Aviva Investors and Legal & General Investment Management (LGIM) as top performers.
Today’s report finds 46% of European asset managers have a biodiversity voting policy, compared with 32% in the US and 23% in Asia-Pacific.
Most asset managers also did not report co-filing a resolution on responsible investment-related issues at all, the report said. For those that did, the most popular subjects were climate and social issues. Twelve asset managers filed or co-filed a resolution on climate, and 10 did so for social issues. Only two asset managers reported to have filed resolutions on biodiversity in the past two years.
Climate and social considered also dominated engagement policies, with far fewer asset managers reporting biodiversity policies. Just under half (49%) had an engagement policy on biodiversity, and only 27% of asset managers reported specific biodiversity commitments.
When it came to reporting on engagements, ShareAction found most asset managers disclosed case studies and thematic engagement priorities, but less than a third included a full list of companies they engaged with.
“Biodiversity is rapidly rising up the finance agenda, so asset managers are working on ways to address this crisis and we expect to see material improvement in the adoption of policies in the near future,” the report said.
In 2022, 150 financial institutions, representing more than $24trn in assets, published a statement in support of establishing a global biodiversity framework at COP15, which was realised at the conference in December. Twelve of the asset managers in ShareAction’s study signed this letter. This statement called on governments to strengthen national biodiversity strategies and action plans, and to put in place policies that would align financial flows with biodiversity goals, including a regulatory framework on biodiversity and a removal of subsidies that harm biodiversity. The report said this shows the impact lobbying practices can have.
Claudia Gray, head of financial sector research at ShareAction, said: “Our report finds that the world’s largest asset managers are stunting their own ambition on the matter of responsible investment by not committing to the most impactful governance and stewardship structures.”
Governance
The report also looked at governance, finding two-thirds of the surveyed asset managers reported their boards or trustees have some responsibility for the oversight of responsible investment policies, up from 21% last year.
Specific knowledge and training is lacking, however, with 22% of asset managers reporting that they ensure at least one board member has specific climate-related expertise and a quarter of board members having mandatory responsible investment training.
Encouragingly, 83% of asset managers reported financial incentives relating to responsible investment, up from just 7% in 2020. Standout firms for this were LGIM and Schroders – LGIM included a 30% bonus for non-financial factors such as a 50% reduction in portfolio carbon emissions intensity by 2030, and Schroders’ 2021 annual bonus scorecard gave a 30% weighting to non-financial metrics such as sustainability.
Gray concluded: “To safeguard the wealth they manage and meet the expectations of their clients, asset managers must have effective governance and stewardship structures in place.”