Norwegian municipal pensions heavyweight KLP has reacted to Vanguard’s shock exit last week from the Net Zero Asset Managers initiative (NZAM) saying it is fine for different investors to pick different measures to push for net-zero greenhouse-gas emissions.
Asked by IPE for KLP’s reaction to the news, Heidi Finskas, vice president corporate responsibility at KLP, said: “We take notice of Vanguard’s decision, and we trust it is not an expression of a weakened commitment from them to a net-zero target.”
“In order for the necessary large-scale transition in the global economy to happen, the finance industry must come together and push for transformation in their portfolios and markets, and we must develop our understanding of climate risk,” she said.
KLP said it had not invested in any Vanguard funds, but was commenting as a fellow investor in global markets.
On 7 December, Vanguard, the world’s second biggest asset manager, issued a statement saying that, after a “considerable period” of review, it had decided to withdraw from NZAM.
The exit was being made “so that we can provide the clarity our investors desire about the role of index funds and about how we think about material risks, including climate-related risks – and to make clear that Vanguard speaks independently on matters of importance to our investors,” the €7.3trn firm said.
Kirsten Snow Spalding, vice president of the Ceres Investor Network and a founding partner of the NZAM initiative, said NZAM regretted Vanguard’s withdrawal.
“It is unfortunate that political pressure is impacting this crucial economic imperative and attempting to block companies from effectively managing risks – a crucial part of their fiduciary duty,” she said.
At KLP, Finskas said: “The Net Zero Asset Managers (NZAM) initiative is definitely not the only way of working for net zero.
“We expect that all investors and managers – including Vanguard as one of the world’s biggest asset managers – takes its fair share of the responsibility in avoiding a climate crisis for this and future generations including our clients,” she said.
“Different investors can choose different measures to push for net zero, as we aim at effects in the real economy, not adjusting portfolios for the sake of it”
Heidi Finskas, vice president corporate responsibility at KLP
KLP itself is also not a member of the NZAM or the Net-Zero Asset Owner Alliance (NZAOA).
Finskas said it was critical for the world to follow the Paris Agreement and reach the 1.5°C target – regardless of choices made by individual asset managers.
“We in KLP have adopted a roadmap on the way to reach net-zero emissions by 2050 and we are deeply committed to standardisation and transparency on climate impact and climate risk in the finance industry,” she said.
As index-based investors themselves, she said people at KLP were strong believers in the merits of index management.
“Different investors can choose different measures to push for net zero, as we aim at effects in the real economy, not adjusting portfolios for the sake of it.
“Engagement and support for the net-zero transition in portfolio companies, for instance, is a key way to influence for all large asset managers,” she said.
Universal owners such as index managers were exposed to the development of the global economy, so it was their obligation as responsible owners to specify for their politicians which policies and regulations, including carbon pricing, were needed to facilitate a climate-friendly and economically-viable transition, she added.
“At the market level, universal investors should engage with standard setters and regulators on disclosure of quality climate data.
“The market-level engagement will in turn enable an informed active ownership pushing for transition to net zero, not exclusion,” Finskas told IPE.
KLP had total NOK720.8bn (€70bn) of assets at the end of September.
Larry Fink, the chief executive officer of the world’s largest asset manager BlackRock, has also been under pressure due to his firm stance on ESG issues, with activist fund Bluebell Capital Partners last week calling on Fink to resign over BlackRock’s use of ESG factors, according to the Financial Times.