Just a quarter of the world’s 77 largest asset managers have made commitments on tackling deforestation, according to a report by campaigning group ShareAction.

None of the asset managers surveyed in part four of the NGO’s Point of No Returns report have committed to avoiding other forms of damage to natural habitats, such as wetland draining for agricultural use or ocean pollution.

ShareAction has called on the globe’s biggest asset houses, which collectively manage $77trn, to make firm commitments in these areas to be seen to be genuinely acting on their ESG ambitions.

Claudia Gray, head of financial sector standards at ShareAction, said: “It is alarming to see too many asset managers are failing to adapt their investments to tackle climate change and the destruction of our valuable and vital biodiversity.

“Asset managers need to use the huge power they wield through the investments they hold to bring about a meaningful transition to a clean and sustainable future.”

The release of this latest part of the ShareAction report coincides with the United Nations’ World Environment Day on 5 June.

It finds asset managers are “out of sync” with the world’s leading scientists and the UN when it comes to emissions and net zero.

They have “inadequate” targets to reduce emissions, and are continuing to invest in companies that are expanding their oil and gas production.

Managers are also stalling the move to green, clean energy by not investing enough in new low-carbon energy opportunities, it found.

ESG data issues

ESG data issues were also raised in the report as a barrier to asset managers meeting sustainability targets – but ShareAction dismissed this saying it “doesn’t stand up to scrutiny”, and they should start using the available data on climate and biodiversity to inform investment decisions.

“Managers are deploying manpower and resources to collect the data but are simply not using it,” the report said.

For example, it found most managers perform climate scenario analysis, yet less than a third reported that they use these results to inform their approach to investment.

Another finding is that only 10 asset managers – all of which are European – have committed to restrict investment in the most harmful fossil fuels across all funds. 

These fossil fuels include coal which is the most emissions-intensive source of energy. They also include unconventional oil and gas, for example fracking or from the Arctic, which is extracted in a way that is more damaging to local communities and the local environment than other extraction methods.

ShareAction wants asset managers to take climate change seriously by setting detailed interim net-zero targets and ruling out investments in fossil fuel expansion.

Also to invest significant amounts in clean energy companies across all funds to help the best climate solutions access the funding they need.