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Study reveals major shortfalls in asset managers’ follow through on ESG commitments

Redington, as part of its annual Sustainable Investment survey, interviewed 122 asset managers from across a range of geographies, covering 232 strategies and representing aggregated £37.7tn in combined AUM.

The report found three key areas managers needed to work on in order to “bridge the gap between rhetoric and reality”.

First was integration, with 87% of the managers reporting integrating climate into their investment processes, an increase from 80% in 2021. Despite this, the follow through on a strategy level was lacklustre with only 685 actually performing climate risk assessments, and just 67% monitoring emissions-based metrics.

“That is a shortfall of 24% and 20%, respectively,” said Redington.

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The second area was engagement, one that scored highly amongst managers’ main concerns. Here, 92% said that they “prioritise climate change in their engagement efforts”, but only 54% said they actually track and report engagement activities.

Emission targets was the final area, with 59% of those surveyed saying they had stock-level net zero targets, but only 34% had these targets in the strategies.

Anastasia Guha, head of sustainable investment at Redington, said that while commitment to these areas area increasing year-on-year this was not enough.

“As industry leaders and responsible stewards of global capital, asset managers cannot afford to hide shortfalls in practice under noble principles, nor should they be comfortable letting firm-level progress mask a lack of action in individual strategies.”

In the study, Redington said that this evidenced how the “industry is grappling with complex and fast-moving change, at a time when climate data still has room for improvement”.

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Guha added that as with many ESG related issues, it was “not surprising that words come before actions” with regards to climate change.

“But translating rhetoric into reality is a challenge that continues to weigh on the asset management industry, and it is clear that the pace of decisive action is significantly lagging.”

She said that the “untapped potential” around engagement was a “notable theme” this year and while most managers to highlighted climate as a priority in their engagement efforts, “many were unable to provide any evidence of engagement on the issue, making genuine progress difficult to track”.

Guha concluded: “At this stage, managers should be using all the tools at their disposal and exercising voting rights to the fullest extent possible, leveraging their influence to positively impact company management.”

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