Kristen Snow Spalding, vice president of the Ceres Investor Network, a founding partner of NZAMi, said “all asset managers are struggling with passive.” But it shouldn’t rule out committing to net zero, she said. Firms can work with the heaviest emitters represented in indexes to get them to decarbonize through engagement, she said. They can also ensure that client mandates are more closely aligned with net zero. But Spalding acknowledged that the industry needs more help from regulators.
Many of the world’s biggest money managers have tended to exclude funds they define as passive from their emissions estimates. An analysis earlier this year of 30 major investment firms showed that none applied fossil-fuel restrictions to all their index-tracking funds, according to Reclaim Finance. Of those, 25 were GFANZ signatories, which at the time included Vanguard, as well as BlackRock Inc. and State Street Corp.
Of the roughly $8 trillion that BlackRock oversees, roughly 27% was actively managed at the end of September. PwC expects the global market for assets under management to reach $145 trillion by 2025, with only 60% of that actively managed. “Passives will gain huge market share,” it said.
Vanguard said 96% of the funds it manages don’t align with net-zero goals, and it now has no plan or commitment to change that.
In April, the Science Based Targets initiative, a UN-backed group, said it would no longer provide emissions-reduction verifications for asset managers that excluded all their passively invested funds.
“Passive funds continue to be a topic that we discuss with financial institutions in their near-term science-based targets,” said Nate Aden, finance sector lead at SBTi. “There are bright spots, and we are elaborating on this topic in our financial-institutions net-zero criteria, the draft version of which we plan to publish early next year.”
This article was provided by Bloomberg News.