The gap between what asset managers say they want to do to address climate change and what they actually are doing "remains painfully wide," a Redington survey released Dec. 6 found.
The investment consultant 's annual sustainable investment survey heard from 127 managers around the world managing 281 strategies and a collective £39 trillion ($49.2 trillion).
While more asset managers are taking climate into account along with financial factors, "there needs to be more evidence of actions and outcomes across the spectrum," said Edina Molnar, vice president for sustainable investment at Redington, in a survey release.
In terms of commitment, the 2023 survey found that while 57% of managers reported some kind of firmwide pledge, it hasn't filtered down to strategy level, where only 30% reported climate commitments. Both figures were down from the 2022 survey, which found 59% firmwide pledges and 34% at the strategy level.
In terms of action, while 86% of strategies measure climate-related risks and opportunities, only 38% of managers reported using a portfolio alignment metric and 23% hire dedicated climate resources, mostly to support disclosure and regulatory obligations and stewardship, the survey found.
Relatively few managers measure emissions of their portfolios. The survey found that 20% of managers still don't measure the Scope 1 and 2 direct emissions of their portfolios, and 32% don't measure Scope 3 emissions, despite demand from asset owners for better data. U.K. pension funds also have to report portfolio alignment metrics under Task Force on Climate-related Financial Disclosures framework regulations.
"The number of managers not measuring Scope 3 is particularly disappointing and begs the question of whether managers are truly integrating climate-related considerations into investment decisions," Molnar said. Among managers with decarbonization targets, 15% had yet to begin identifying the largest emitters in the portfolio, the survey found.
Best practices would start a decarbonization strategy by identifying higher-emitting issuers to understand a fund's emission profile and identify how the strategy will achieve its goals, while failing to measure emissions "tends to undermine our trust in the robustness of decarbonization targets, so we hope to see a significant improvement here moving forwards," said Oliver Wayne, head of manager research at Redington, in the release.
