Hortense Bioy, Morningstar’s director of global sustainability research, today published an analysis of more than 40 asset managers’ net-zero commitments and the challenges they face to set interim targets, based on the Net Zero Asset Managers Initiative latest progress report.
Bioy also compares the approaches taken by the three largest asset managers, BlackRock, Vanguard, and State Street.
Takeaways from the report include:
· Assets committed by the 43 managers in the second progress report vary from 4% to 100%. Only nine committed 100% of their AUM and 15 committed less than 50%.
· BlackRock, Vanguard, and State Street made contrasting AUM commitments of 77%, 4%, and 14%, respectively. Vanguard’s 4% commitment consists entirely of sub-advised assets, which means that the firm has effectively committed 0% of its in-house managed assets.
· Investors would benefit from standardized approaches to target setting. Currently, the wide range renders it difficult to make direct comparisons between asset managers, raising questions about the reliability of any of the commitments and decarbonization targets.
· Less than a fifth of the firms set absolute emission reduction targets, which are harder to reach than carbon intensity targets. About a third of the managers didn’t set emission targets but said they aim to have a portion of their assets invested in issuers with science-based targets.
· Ten asset managers have no firm-wide policy on coal and other fossil fuel investments, including: Invesco, Lazard, MFS, State Street, Vanguard, among others.
Hortense Bioy, director of sustainability research, comments: “A wide range of approaches to setting net-zero targets has produced what appears to be varying levels of commitment across managers, leading to investor confusion. Nevertheless, despite the challenges and the fact that some commitments look inadequately low, the results are encouraging.
“The Net Zero Asset Managers Initiative, created only 18 months ago, has already attracted some USD 61 trillion of assets under management. More than 80 of the 273 signatories have already announced interim targets. We hope to see a higher overall commitment from the next wave of managers who will publish their targets around the time of COP27, in November. Ultimately, climate-focused investors will want to partner with the most committed managers.”