Despite the asset management industry’s clear commitment to climate-related issues, practical and concrete responses continue to lag initial policy statements, according to recent research conducted by consultancy Redington.
As part of its annual Sustainable Investment (SI) Survey, the firm engaged with 122 asset managers across a range of geographies, covering 232 strategies and an aggregated £37.7trn (€43.3trn) in combined assets under management.
On climate change in particular, the research revealed three key areas where managers must act in order to bridge the gap between rhetoric and reality:
- Integration: 87% of managers reported integrating climate into their investment processes (up from 80% in 2021). But at a strategy level, far fewer (63%) actually perform climate risk assessments and only 67% monitor emissions-based metrics. That’s a 24% and 20% shortfall, respectively.
- Engagement: 92% of the surveyed strategies stated that they prioritise climate change in their engagement efforts – but only 54% track and report engagement activities. This is a 38% shortfall.
- Emissions targets: 59% of managers have a firm-level net zero target, but similar targets cover only 34% of their strategies. This is a shortfall of 25%.
The results show an industry grappling with complex and fast-moving change – at a time when climate data still has room for improvement.
Anastasia Guha, head of sustainable investment at Redington, said: “On climate change, as on so many issues in the social, economic and environmental sphere, it’s not surprising that words come before actions. But translating rhetoric into reality is a challenge that continues to weigh on the asset management industry, and it is clear that the pace of decisive action is significantly lagging.”
She noted that the increasing commitment to integration, engagement and emissions objectives “is today, as it was last year, welcome progress”. However, she said that “asset managers cannot afford to hide shortfalls in practice under noble principles – nor should they be comfortable letting firm-level progress mask a lack of action in individual strategies”.
She added: “The gap between statements at firm level and what is delivered within strategies is a trend of particular note in this year’s findings and a distinction that the industry needs to address sooner rather than later.”
Smart Pension forms biodiversity partnership with AXA IM
Smart Pension, a workplace pension provider in the UK, has formed a new biodiversity partnership with AXA Investment Managers. The move further underlines Smart Pension’s strong emphasis on sustainable investing.
“The pension industry has a golden opportunity to drive faster decarbonisation, by investing in businesses that are serious about cutting their carbon emissions and addressing biodiversity loss. Doing so improves outcomes for savers in both financial growth and outcomes for the environment,” AXA IM announced in a statement.
Paul Bucksey, chief investment officer at Smart Pension, said: “Smart Pension’s flagship growth strategy has invested over 70% in sustainable funds for a while now, which we expect will play a key role in achieving our 2040 net zero target. We have chosen to partner with AXA IM to incorporate its biodiversity strategy as we seek to improve results further for our members.”
Rachel Basarab-Horwath, global head of pensions at AXA IM, added: “From a corporate perspective the company [Smart Pension] has an ethos that aligns with AXA IM’s stated aims of actively investing for the long-term to help our clients, our people and the world to prosper. The strategy focuses on four key areas we have identified to help prevent biodiversity loss: sustainable materials, land and animal preservation, water ecosystems, and recycling and recirculation.”
Finnfund creates framework for sustainability bond issuance
Finnish state-owned development financier Finnfund announced it has established a sustainability bond framework to back its own future issuance of green, social and sustainability bonds.
Olli Sinnemaa, Finnfund’s chief financial officer, described it as an important step, adding: “We strive to mobilise more funding for sustainable development and climate actions as well as to provide other investors an opportunity to join this work.”
The framework is aligned with the Green Bond Principles, Social Bond Principles and Sustainability Bond Guidelines, all published by the International Capital Market Association in 2021, the Helsinki-headquartered institution said.
Danske Bank advised on the establishment of the framework and Sustainalytics acted an independent second opinion provider, the fund said.
German sustainable finance committee sets up priorities
The German sustainable finance advisory committee, the body advising the government on its sustainable finance strategy, has listed its priorities for the current legislative period after a meeting in Leipzig.
The committee has set up six working groups to focus on a traffic light system for sustainable finance products (intended to help investors assessing sustainability when investing) an engagement platform, data infrastructure and digitalisation, financing the economic transformation, reporting and measurement, national and international affairs (politics and economics), it said in a statement.
The committee will focus its work on the question of stability, sustainability and resilience of the financial system to support the socio-ecological transformation of the economy, it added.
The committee will develop recommendations for the government, and at the same time assist the cabinet on a wide range of current issues relating to sustainable finance.
The chair of the advisory committee, Silke Stremlau, said: “The current crises and challenges are staggering in their magnitude. This makes it all the more important to work on a financial market that minimises risks and redirects investments into sustainable sectors, so that we in Germany are more resiliently positioned and can actively counter climate change, biodiversity loss and increasing social tensions.”