The largest asset managers in the U.S. and Europe are not matching climate commitments with investments and engagements, according to a report released Wednesday by five climate finance organizations.
The report, "Who's managing your future? An assessment of asset managers' climate action"published by Reclaim Finance, ReCommon, Sierra Club, The Sunrise Project and Urgewald, uses what it describes as previously unpublished data on the 25 largest European and five largest American asset managers.
The report assessed managers on three things: whether they stopped purchasing new bonds issued by the biggest developers of new fossil fuel projects; whether they set expectations for the companies they invest in to end fossil fuel expansion; and whether they have sanctions in cases of non-compliance.
Bond purchases by the 30 largest asset managers and their parent companies came under particular fire in the report, which found them responsible for investing in $3.5 billion in bonds issued in the last 18 months by 40 companies actively involved in fossil fuel expansion. The research covers bonds issued after Jan. 1, 2022, by 38 of the largest developers of new fossil projects.
Vanguard Group had the most new fossil fuel bond investments, with at least $1.2 billion in recent issues by 19 major fossil fuel developers, according to the report. A call to Vanguard was not immediately returned.
Pension funds and other institutional clients of the asset managers should demand stronger policies against fossil fuel development in the face of a climate crisis, the organizations said.
A disconnect between pension funds' climate ambitions and fossil fuel investments was also the subject of a report issued Wednesday by U.K. pension advocacy group Make My Money Matter.
The Fossil Fuels in UK Pensions report found that pension funds there have invested roughly £88 billion ($112 billion) in the oil and gas industries despite their own commitments to reach net zero.
The report looked at more than 50 pension funds with net-zero commitments and found they have not stopped investing in fossil fuel companies that are expanding oil and gas production. While a majority of the pension funds disclosed energy companies like Shell and BP in their top holdings, no pension fund listed clean renewable energy stocks, according to the report, conducted with sustainability research house Route2.
Starting with £2.9 trillion in total assets under management in the U.K. pensions industry, Route2 divided those assets by asset class, and found £935 billion in assets more likely to have exposure to fossil fuels, such as listed equities and corporate bonds. Of the £935 billion, £88.1 billion was exposed to fossil fuels.
"The UK's financial institutions have a critical role to play in how we meet – or miss – national and global net zero targets,'' it said.