Asset managers trail banks on climate change says investor report

European banks lead peers in the US and Asia on risk and product planning.

Specialist asset managers and investment banks are significantly lagging against more diversified banking groups in the integration of climate change into environmental policies, risk management and product development, according to a report, commissioned by Ceres, the biggest investor and environmental coalition in the US, and the Investor Network on Climate Change.
Among the fund managers analysed in the survey of 40 financial services groups, State Street was the best performer with 36 points out of 100. The results were based on a climate change governance index comprised of 14 indicators to evaluate board oversight, management execution, public disclosure, emissions accounting and strategic planning. Other specialist fund managers surveyed came out poorly. US managers Legg Mason and Franklin Resources were bottom scorers with just 3 points and 1 point respectively.
Pure investment banks tended to score higher than fund managers. Top performer was Goldman Sachs with 53 points, followed by Merrill Lynch on 52 points. Bear Sterns was the poorest performer with zero points.The scores for diversified banking groups, which can include fund management and investment banking subsidiaries, were generally higher again. The HSBC group was the most environmentally conscious, scoring 70 points out of 100. ABN Amro was second with 66 points. Citigroup was the highest scoring US bank with 60 points. The lowest scoring bank was The Bank of China with four points.
Overall, the report showed European banks are leading their peers in the US and Asia on climate change issues.
The median score among the financial houses was 42, which the report said meant most had room for improvement.
The 40 banks included 16 in the US, 15 European, five Asian, three Canadian and one Brazilian.
The publication of the report, titled: “Corporate Governance and Climate Change: Banking Sector,” which was produced by RiskMetrics Group, suggests institutional investors are becoming increasingly concerned by how their financial providers are planning for the impacts of climate change.” The report said

that 28 of the 40 banks surveyed disclosed their greenhouse gas emissions from operations, and 10 banks have pledged to become carbon neutral.” Twenty-one banks offer climate-related investment products, including 10 with climate-specific funds and indexes; nearly all of these investment products have been launched in the last two years. Twenty-two banks now offer climate-related retail products—from preferred rate “green” mortgages to credit card programs and “green” car loans. Of the nearly 100 climate change research reports written by banks, 57 were issued in 2007 alone. The report says carbon trading is also being seized as an opportunity banks. Seventeen of the 40 are involved in trading under the European Union Emissions TradingScheme. Seven banks are active in voluntary exchanges like the Chicago Climate Exchange and the new “Green Exchange” announced by the New York Mercantile Exchange in December 2007. However, it said few banks had adopted strategic governance responses to climate change. Only 12 banks report board-level oversight of climate change, 11 of which are non-U.S. firms. Just nine banks discuss climate change or related issues in their 2007 securities filings. Only six banks formally calculate a carbon price as part of their energy-related lending decisions. Just one bank—Bank of America—has set a target to limit fossil fuel emissions associated with the utility portion of its loan portfolio.