Robeco, BNP Paribas Asset Management, and L&G Investment Management (LGIM) have topped a list of groups with the most responsible investment practices
ShareAction, an organisation campaigning the global investment system to take responsibility for its impacts on people and the planet, looked at 75 of the world’s largest asset managers and ranked them on how they manage their ESG risks and opportunities.
While the trio of assets managers named above (Robeco, BNP Paribas Asset Management and LGIM) scored the highest, alongside Dutch pension investor APG Asset Management and Aviva Investors, in its report Point of No Returns ShareAction also called out the six largest firms in the world for have a very limited approach to ESG and “exposing millions of savers worldwide to potential financial losses in the long term”.
BlackRock, Vanguard, State Street, Fidelity Investments, Capital Group, and JP Morgan Asset Management, all US-based and with the combined assets under management (AuM) of over $20trn, rank in the bottom two bands.
Top 10 asset managers for ESG
|Rank||Asset manager||Rating||AuM ($bn)|
|2||BNP Paribas Asset Management||A||683.12|
|3||L&G Investment Management||A||1,329.05|
|4||APG Asset Management||A||568.32|
|6||Aegon Asset Management||BBB||381.65|
|8||NN Investment Partners||BBB||236.21|
Bottom 10 asset managers for ESG
|Rank||Asset manager||Rating||AuM ($bn)|
|1||Bradesco Asset Management||E||185.46|
|3||Mellon Investments Corporation||E||569.27|
|5||Dimensional Fund Advisers||E||576.64|
|6||JP Morgan Asset Management||E||1,765.27|
|7||Credit Suisse Asset Management||E||396.18|
|9||MetLife Investment Management||E||586.93|
|10||E Fund Management||E||190.76|
ShareAction also highlighted that unfortunately no asset manager it assessed demonstrated leadership across its entire responsible investment approach. The report said: “While there are pockets of leadership across different asset managers’ approaches to responsible investment, no asset manager demonstrates best practice across its entire approach. For that reason, no asset manager was awarded a AAA or AA rating.”
Felix Nagrawala, senior analyst at ShareAction, added: “ShareAction’s most ambitious study yet reveals who is really walking the talk on environmental and social issues, and who is dragging their feet in the asset management space. While many in the industry are eager to promote their ESG credentials, our analysis clearly indicates that few of the world’s largest asset managers can lay claim to having a truly sustainable approach across all their investments.
“Because the power of the global asset management sector relies on the money put into the system by millions of savers worldwide, the findings of our study are just as salient for ordinary people as they are for the industry. Through the decisions they make every day, asset managers shape the world around us, and the world into which we retire, yet they are failing to drive the change we urgently need. It is imperative that they start to account for the real-world impacts of their investments and step up to meet the challenges of the social and environmental crises we are now facing.”
The research also found 38 out of 75 of the world’s largest asset managers, with greater assets under management than the GDP of the US and China combined, are stalling on taking action on environmental, social and governance issues and US companies are lagging European peers.
In Europe, companies based in the Netherlands showed strong performance followed by France and the UK, while Japanese asset managers surprised with better performance than their US and Asia Pacific counterparts.
The report added: “The findings in this report show that, within the asset management industry, much work remains to be done to raise the standard of responsible investment. While some asset managers demonstrate leadership in particular areas, none are performing strongly across each of the topics included in our methodology. The scale and urgency of current ecological and social crises demands far more than a ‘business-as-usual’ approach from asset managers, who are encouraged to use this ranking and report findings to benchmark their individual performance and drive improvements where needed.”
ShareAction set out guidelines for asset managers to improve their ESG credentials including (and not limited to):
- Strengthening dedicated responsible investment policies by explicitly covering climate change, human rights, and biodiversity and including ambitious commitments, such as portfolio alignment with the goals of the Paris Agreement
- Develop and strengthen responsible investment voting policies by explicitly committing to support shareholder resolutions related to ESG issues
- Improve transparency on ESG-related engagement by strengthening disclosure around ESG topics
- Ensure accountability for responsible investment issues at the senior executive and board level
- Address client concerns about the integrity of ESG labelled products by strengthening integration and disclosure on issues such as climate change, human rights, and biodiversity
The report also urged asset owners to play their part as they have the “most to lose from inaction”.
“The wide-reaching and systemic nature of these risks means that it is not possible to avoid them simply through diversification or divestment. Asset owners should use their influence to hold asset managers to account on these risks,” the report said.
It recommended asset owners should:
- Strengthen due diligence of asset manager selection by reviewing performance in the areas of ESG-related voting and engagement, responsible investment governance, and how real-world impact is considered
- Be aware that signing up to supportive initiatives such as the PRI or Climate Action 100+ does not always correspond with having a fit for purpose responsible investment approach
- Require asset managers to regularly report on how responsible investment issues are being managed throughout all stages of the investment process, including case studies.
- End relationships with asset managers who do not live up to set expectations on managing responsible investment issues.
Luba Nikulina, Willis Towers Watson’s global head of research, commented: “While it is positive to see leaders in this ranking taking affirmative action on systemic ESG risks, this ranking by ShareAction helps demonstrate just how much progress needs to be made by the industry. We welcome this research, which will serve as a valuable tool for asset owners looking to ask tough questions of asset managers. It is hard to see how managers failing to take suitable action will be able to meet the needs of their present and future clients as they seek more ESG-aware stewards of their assets. This is why we are working closely with asset managers in 2020 to help deliver investment solutions that are consistent with a sustainable world.”
ShareAction ranked asset managers based on disclosure and management of ESG risks and impacts across their portfolios. All asset managers responded to the survey, with the exception of Bradesco Asset Management, E Fund Management, Fidelity Investments, JP Morgan Asset Management, PGGM, and SEB.