World’s top asset managers worst in class on ESG, ShareAction finds

JP Morgan AM jumps up the rankings as US giants lag European counterparts.

ESG is a growing asset class, but it's also a growing litigation risk.

The world’s most influential asset managers fared poorly on ESG policies and practices compared to smaller competitors, according to ShareAction’s annual 2022 market assessment.

Blackrock, State Street Global Advisors, Vanguard and Fidelity Investments – which have the most assets under management globally – were ranked 54th, 64th, 67th and 72nd, respectively. All four received either D or E grades.

ShareAction assessed a total of 77 major asset managers, controlling some $77 trillion of assets.

Two-thirds of the managers surveyed, representing asset of $60 trillion, were given scores of CCC or worse, indicating “serious gaps” in policies and practices for at least one sustainability-related area. Scores ranged from AAA through to E, with no manager receiving a AAA score in 2022.

JP Morgan Asset Management received plaudits from ShareAction after jumping to 13th place from 71st in 2021, on the back of more robust social and biodiversity policies. The manager was named best improver by the sustainable finance NGO.

European and UK firms topped the league table, with Robeco in pole position followed by BNP Paribas Asset Management, Aviva Investors and Legal & General Investment Management. This broadly held for the remaining results, with European asset managers achieving better scores than North American or Asia-Pacific peers.

ShareAction suggested that the dominance of European managers was buoyed by a supportive regulatory environment, with governance, stewardship and climate emerging as strengths for the region. On average, British, Dutch and French asset managers demonstrated strong performance on stewardship relative to other regions, while French asset managers scored well on social issues.

US managers generally performed poorly, with climate being a notable area of concern. ShareAction said the results were even more striking given that US investors have a “crucial role to play in responding to the climate crisis because of their outsized influence”.

The critique comes amid a politically charged pushback against ESG investing practices in the US led by right-wing groups such as the State Financial Officers Foundation, members of which have implemented laws blacklisting financial institutions that are decarbonising their portfolios. SFOF recently trumpeted a decision by Vanguard to pull out of the $59 trillion Net Zero Asset Managers (NZAM) initiative.

Fidelity Investments, which was ranked 72nd by ShareAction, has sat out the NZAM from the start, along with PIMCO (50th), PGIM (31st) and Capital Group (49th).

Asset managers domiciled in Asia-Pacific were collectively worse off compared to other regions. The highest-ranked APAC managers were Japan’s Nomura Asset Management and Asset Management One, coming in at 24th and 35th respectively. Despite this, a number of managers from the region showed class-leading performances on individual areas, with biodiversity a particular highlight.

The poor performance of Chinese managers was impacted by limited public disclosures regarding their policies, according to ShareAction. More stringent rules on disclosure have come into force since the survey period concluded in November 2022.

The NGO noted that biodiversity was the lowest-scoring ESG topic, continuing a trend from previous years. Just 10 percent of the assessed assets managers had a dedicated biodiversity policy in place for all assets.

ShareAction will release its individual asset manager assessments in the coming months, with governance and stewardship reports due in Q1 ahead of the AGM season. Climate, biodiversity and social reports will follow in Q2.