Asset managers off-track on urgent path to net zero

The net zero transition isn’t just an environmental necessity; it’s an economic imperative. And as the world looks to make this seismic shift, eyes naturally turn to the global finance sector. A recent report, however, suggests that the industry might not be shouldering its share of the responsibility.

Transatlantic divergence in climate commitments

While Europe has long been known for its aggressive stance on ESG integration, the US has traditionally lagged. But recent developments suggest the gap might be widening. Amidst anti-ESG sentiments fueled by some Republican policymakers, many of the largest US asset managers seem to be rolling back on their green initiatives. Yet, their climate commitments still shine brightly on their company brochures and websites. As FinanceMap insightfully noted, the US isn’t just playing catch up; it’s potentially losing ground.

“The data shows that while they may talk the talk, most asset managers are not walking the walk when it comes to using their influence to drive real change in investee companies and sustainable finance policy,” said FinanceMap Program Manager Daan Van Acker.

“Since our 2021 report, asset managers’ portfolios are still misaligned with net-zero targets, environmental stewardship efforts have stagnated, and asset managers are not supporting effective sustainable finance policy.”

The Paris Agreement: Who’s on board?

It’s disheartening to see that out of the big players, only Schroders and Natixis have portfolios aligning with the Paris Agreement’s emission goals. The world’s most significant misalignment honour goes to China’s Ping An, but close on its heels are industry giants like Goldman Sachs, Vanguard, BlackRock, and State Street Corporation. The Paris Agreement isn’t just a set of guidelines; it’s a vision for our planet’s future. Falling short isn’t an option. The stark fact that these 45 asset managers collectively managing $72trn invest almost three times more in fossil fuels than in green ventures, as defined by the EU’s taxonomy standards, underscores the urgent need for portfolio rebalancing.

COP28: A Potential Game-Changer?

Historically, the finance sector has been viewed as the torchbearer for net zero transitions. But as recent trends suggest, this torch might be flickering. The anticipation around the COP28 conference is palpable. It’s set to determine the role governments will play in reigniting the net zero movement. The onus isn’t just on asset managers; governments worldwide need to step up.

To every asset manager reading this: today’s challenges are tomorrow’s opportunities. The call for a net zero transition is loud, clear, and urgent. While the current landscape may seem daunting, remember that with challenge comes opportunity. Your decisions today can shape not just your portfolio’s future but the world’s. Embrace this responsibility and lead the charge towards a greener, brighter future.

If you’re looking for effective ways to enhance your engagement across sustainable funds, don’t hesitate to reach out!

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