BlackRock and Vanguard have been criticised by a climate think tank for rolling back on their ESG commitments in light of an anti-ESG trend in the US.
A study by UK-based think tank, InfluenceMap, found the world’s 45 largest asset managers, which hold US$72 trillion in assets under management, are behind in meeting their 2050 net zero commitments.
Its Asset Managers and Climate Change 2023 report examined the firms on their equity portfolio analysis, stewardship of investee companies and sustainable finance policy engagement.
It particularly noted a downturn for US asset managers where BlackRock, Vanguard, Fidelity Investments and State Street Global Advisors (SSGA) all received scores which indicated a lack of effective climate stewardship processes and use of shareholder authority to engage companies to transition.
Blackrock fell from B to C, SSGA scored C+, Vanguard fell from C to D+ and Fidelity Investments received E+.
Only 7 out of 25 US firms scored higher than a B-.
None of the US firms surveyed had Paris-aligned equity fund portfolios and stood out as a positive advocate on sustainable finance policy, it said. Instead, they focused on limited but positive engagement of general climate ambitions while outlining objections to specific policies.
“Particularly, the ambition of US asset managers appears to have decreased, reversing an upward trend until 2022. This reversal coincides with the recent anti-ESG trend in the country with some state legislators seeking to limit investors’ use of ESG factors and the phase out of fossil fuel investments.
“US-based asset managers displayed a trend of voting against a large portion of climate-related resolutions in 2022 with the average US manager supporting just 36 per cent of climate resolutions, compared to 50 per cent in 2021.”
While the report noted some asset managers were vocal against these political concerns, they simultaneously took actions which went against this public commentary.
“While some asset managers have stated high-level concerns, most of the sector has not mobilised to combat these efforts. BlackRock wrote a letter to state attorneys-general, stating it was ‘disturbed’ by emerging efforts to limit ESG investing, while State Street’s CEO Ron O’Hanley criticised the ‘anti-ESG’ trend.
“However, in direct communications with Texas regulators, BlackRock stated support for continued investment in oil and gas. This was accompanied by a general shift in the firm’s corporate messaging from acknowledging its ‘significant responsibility’ in responding to the climate crisis, to the more cautious approach that ‘BlackRock’s role is not to engineer a particular outcome in the real economy’.
“In December 2022, Vanguard left the Net Zero Asset Managers initiative amid an inquiry by Texas regulators into the company’s ESG practices.”
Federated Hermes was the only standout US firm with 87 per cent of climate-relevant resolutions supported by the asset manager.
Last month, Morningstar announced that Vanguard had seen substantial outflows from its sustainable funds over two consecutive quarters. In the three months to 30 June, it lost $2.6 billion after an institutional client pulled its investment from the firm’s ethically conscious funds.
The firm also exited the global alliance Net Zero Asset Managers initiative last December, and was the subject of civil penalty proceedings in the Federal Court for alleged greenwashing.
ASIC alleged Vanguard made false and misleading statements and engaged in conduct liable to mislead the public in representing that all securities in the Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged) (Fund) were screened against certain ESG criteria.
Last December, Vanguard received three infringement notices totalling $39,960 for alleged greenwashing in a separate matter.
Seriously? This is out of control. Who is driving this agenda?