ESGFebruary 9, 2024

Institutional Investor Group Urges Asset Managers to Deliver on Climate Strategies

A U.N.-backed alliance with $9.5 trillion in AUM warns that the entire global economic system is at risk from climate change.

Reported by Michael Katz

A United Nations-backed group of institutional investors with $9.5 trillion in assets under management is urging public and private asset managers to deliver on ambitious climate strategies, warning that “mitigating climate change is necessary to protect a functioning global economic system.”

In a “call to action” released this week, the Net-Zero Asset Owner Alliance emphasized to the asset management industry that serving clients is only possible through “climate stewardship.” The 88 institutional investors have committed to transitioning their investment portfolios to net-zero of greenhouse gas emissions by 2050. The group includes the California Public Employees’ Retirement System, Canada’s Caisse de dépôt et placement du Québec and the UN’s Joint Staff Pension Fund.

The group cites four critical principles it insists asset managers must implement:

Address the systemic risk of climate change to the “entirety of investments and operations;”
Support a consistent, clear and accountable proxy voting landscape for public equities;
Align lobbying activities with the asset manager’s own stated climate-related commitments, as well those of its portfolio companies; and
Ensure that climate engagement is more systematic and transparent.

“Implementing these not only protects the long-term financial interests of both the asset managers and their asset owner clients, but it would also increase the ability of asset managers to win mandates from asset owners committed to net zero, which are growing in numbers,” stated the Alliance in its statement.

For the approach to be systematic in nature, according to the alliance, asset managers must individually implement all four of the principles and their underlying activities as described in the Alliance’s guidelines.

“Asset managers are critical partners in helping asset owners address climate-related risks and opportunities,” states the Alliance’s call to action. “This applies to both private and public asset classes— requiring integrated, tailored strategies to ensure insights and activities across all asset manager functions pursue the science-based outcomes.”

The alliance’s call to action comes as many asset managers have come under assault from an attack on environmental, social and governance influences that has spurred several U.S. states to legislate boycotts of firms that strategically divest or shun fossil fuel-related investments.

BlackRock has been a major target of the anti-ESG movement since CEO Larry Fink announced four years ago that sustainability would become the central focus of the world’s largest asset manager’s investment strategy. Several states have since sold off assets managed by the firm, and multiple congressional committees and at least 19 state attorneys general have sent letters to other asset managers and proxy advisory firms accusing their sustainable investing strategies of being anti-competitive and a breach of fiduciary duty.