IPE ESG Briefing: ESG retreat will cost US managers mandates in Europe

Two major pension funds recently told IPE they believe US managers will lose contracts to their European counterparts due to the political and legal climate in the US, which is affecting voting and engagement practices there.

AkademikerPension ended its relationship with State Street Global Advisors, now State Street Investment Management, in March, and CIO Anders Schelde said: “In all likelihood, for future searches we’ll end up with a European manager.” 

In the UK, Patrick O’Hara, head of stewardship for local authority pool LGPS Central, told IPE: “All else being equal, I do think we may see a trend of European asset owners favouring the appointment of European managers.” 

In February, The People’s Pension announced it had left State Street, but in addition to transferring funds to management by Amundi, it also appointed Invesco, a US manager.  

According to consultancy Isio, US asset managers’ exits from collaborative initiatives such as Climate Action 100+ “may result in rising fragmented stewardship efforts on systemic risks”.

It flagged how legal challenges are restricting ESG engagement activities for managers with US exposure, which is one of the topics we dived into in our recent US-focused four-part series on stewardship and shareholder rights:

• Has the SEC’s ‘13D’ ruling changed shareholder engagement?
• The state of shareholder rights in US and the EU
• Shareholder engagement: what works and what doesn’t?
• The ‘stewardship recession’: Asset owners push back

In Europe, meanwhile, the Institutional Investors Group on Climate Change (IIGCC) is calling on lawmakers to “strengthen and streamline the approach to stewardship” as part of the current review of how sustainable finance is regulated in the bloc.

Earlier this year, BNP Paribas Securities Services wrapped up its latest biennial ESG study, commenting that private capital managers are emerging as the strongest advocates for ESG and sustainable investing.

A recent survey would suggest they may have good reason to, with private equity investors claiming that sustainability has increased the revenue growth of some portfolio companies by up to 6%.

The Principles for Responsible Investment, which conducted the survey as part of a project by Bain & Company and the NYU Stern Centre for Sustainable Business, is launching a new project looking at how to harness the financial value that sustainability can generate in private markets.

Last week, it released a guide aimed at improving stewardship practices within private debt, saying lenders faced significant barriers to stewardship that do not necessarily exist elsewhere.

Items to note:

• The Impact Investor Conference 2025 is on 11 November in The Hague Conference Centre New Babylon, The Netherlands

Susanna Rust

ESG Editor