Green Century exits Net Zero Asset Managers initiative

Green Century Capital Management has left the Net Zero Asset Managers initiative (NZAM), Responsible Investor can reveal. 

The US firm manages Green Century Funds, which claims to be one of “the first families of fossil fuel-free, environmentally responsible mutual funds”.

Leslie Samuelrich, president of Green Century, told RI that the exit occurred in March and was prompted by legal and compliance concerns. 

“We take these pledges very seriously and want to do them properly,” she said. “It’s unfortunate we had to leave, but we couldn’t figure out how to definitively meet the net-zero pledge because the funds are already fossil fuel free.

“If you start out as a fossil fuel free mutual fund family, the low-hanging fruit of gas and oil are gone and you must rely more on reducing your emissions through shareholder advocacy. And our legal and compliance department was uncomfortable relying on our shareholder advocacy work to hit the targets.”

She continued: “We do a lot of engagement around deforestation and climate risk but the progress relies on other companies making the commitments and following through.” 

Samuelrich said the firm has spoken to other asset managers with low fossil fuel exposure and that their legal teams are more comfortable relying on shareholder advocacy to meet the NZAM requirements. 

Another concern for Green Century was understanding the climate impact of its bond portfolio. 

“We have tried twice – in fact the Green Century Balanced Fund did one of the first carbon footprints over a decade ago – but measuring carbon intensity of fixed income holdings remains a challenge,” Samuelrich told RI. 

The only other known dropout from NZAM is Vanguard. The US giant, which pulled out in December, said at the time that it had decided to quit in order to make it clear that it “speaks independently on matters of importance to our investors”. 

GFANZ’s other sector-specific alliances have also seen departures, but not in large numbers. 

Last week Zurich Insurance Group became the second insurer to drop out of the Net Zero Insurance Alliance (NZIA); this followed Munich Re’s departure the previous week. 

Germany’s GLS Bank pulled out of the Net Zero Banking Alliance in February, and the Net Zero Asset Owner Alliance (NZAOA) has seen the departure of one Australian and one Austrian pension fund. US Consultancy Meketa also left the Net Zero Investment Consultants Initiative last year.   

Samuelrich, however, was keen to stress the value of NZAM.

“It has moved – especially the larger, slower-moving institutions – to start taking global warming and the transition to a clean economy more seriously,” she said. “It is most important for those firms that needed a jump start and peer pressure to get started to deal with climate risk and their role in transitioning to a clean economy.” 

Looking ahead, Samuelrich said Green Century is still committed to the climate transition and will keep pushing companies to adopt science-based targets and transition plans.

Lack of response to Anti-ESG

Another US ESG-focused manager, who is still a member of NZAM, flagged concerns surrounding the initiative’s response to the ESG backlash in the US. 

Speaking anonymously to RI, the investor said they joined as they saw it as a great way to raise awareness for investors investing for decarbonisation. They added that they believed – and still do – in the mission, and that the initiative provides lots of helpful resources. 

“However, when it comes to the ESG pushback from policymakers in the US, I don’t think [NZAM] has done enough to assuage and address signatories’ concerns,”   they said. “Instead they’ve been issuing public activist statements – like the Freedom to Invest Responsibly – which I’m not sure is the most effective.”  

Membership of NZAM was criticised as being “inconsistent with your clients’ financial interests”, in a recent open letter from several state attorneys general to the 50 largest asset managers based in the US.  

The unnamed investor said it would be helpful for NZAM to engage with signatories on the issue. “They should say, ‘we recognise the pushback and that organisations have left GFANZ, but this is what we can do going forward’. And they should have an open door for signatories to come and talk.”  

On whether they would leave if NZAM fails to respond to the anti-ESG movement, the investor said it was too early to say. “We want to give them a chance.”  

Kirsten Spalding, vice president of Ceres’ investor network and chair of the NZAM staff working group for this fiscal year, told RI: “We’re sorry to see a manager go, but I haven’t heard of others leaving. We really do believe that the net zero commitment supports investors in both managing risks and looking for opportunities in the zero carbon economy that’s coming.”