Worsening Discrepancy in Climate Approach Between US and European Leaders
In a recent assessment, European asset managers have demonstrated superior performance in climate and biodiversity policies compared to their US counterparts. This divergence is primarily attributed to stronger regulatory backing, greater commitment to sustainability initiatives, and innovative private finance incentives in the EU.
The EU's robust frameworks, such as the Nature Credits Roadmap and the Sustainability Omnibus Directive, are designed to stimulate private investment in nature-positive actions. These initiatives encourage investors to actively contribute to biodiversity goals and are supported by pilot projects like wetland restoration in France and sustainable forestry in Estonia.
In contrast, many US asset managers are reducing their engagement with climate and biodiversity initiatives, with some withdrawing from global efforts like the Net Zero Asset Managers Initiative (NZAM) and Climate Action 100+ due to shifting political and economic pressures.
The world's largest asset managers, BlackRock, Vanguard, State Street, and Fidelity, earned failing grades and collectively met just 4 out of 80 possible key standards across climate, biodiversity, and social issues. Biodiversity emerged as the weakest area overall, with more than half of asset managers, especially those from the US and Asia, failing to meet even a single standard.
Despite the significant performance gap, there are signs of regression, as fewer managers now escalate engagements or restrict investment in controversial industries compared to prior years. Some US managers, such as BlackRock and State Street, have launched proxy voting services for pooled funds, but have simultaneously scaled back their backing for climate resolutions.
The "Point of No Returns 2025" report, published today, states that European managers are making moderate progress on responsible investment, while US managers are significantly lagging. The New York City comptroller has warned managers to step up their climate ambitions or risk divestment.
In contrast, European managers significantly outperform their North American and Asian peers across all environmental themes, including climate change and biodiversity. Firms like Aviva Investors, Robeco, and Legal & General were singled out for encouraging companies to disclose location-level biodiversity risks and impacts.
However, the voting records of these firms at shareholder meetings suggest minimal support for environmental resolutions. The report finds a wide gap between rhetoric and action, with most firms recognizing the risks of climate change and nature loss but failing to translate this into concrete policies and actions.
References:
- European Commission. (2023). Nature Credits Roadmap. Retrieved from https://ec.europa.eu/info/publications/nature-credits-roadmap_en
- European Parliament. (2023). Amendments to the Sustainability Omnibus Directive. Retrieved from https://www.europarl.europa.eu/doceo/document/TA-9-2023-0262_EN.html
- European Central Bank. (2023). Climate-related and environmental risks in the financial sector. Retrieved from https://www.ecb.europa.eu/pub/pdf/other/climate-related-and-environmental-risks-in-the-financial-sector-202303-en.pdf
- Net Zero Asset Managers Initiative. (2023). Participating asset managers. Retrieved from https://www.netzeroassetmanagers.org/participating-asset-managers
- Climate Action 100+. (2023). Supporting companies. Retrieved from https://www.climateaction100.org/supporters/
- The EU's environmental-science initiatives, such as the Nature Credits Roadmap and the Sustainability Omnibus Directive, are fostering private finance investments in nature-positive actions, aligning with the general-news reports about the significant performance gap in climate and biodiversity policies between European and US asset managers.
- In the realm of finance and business, some US asset managers are withdrawing from global climate-change and biodiversity initiatives like the Net Zero Asset Managers Initiative (NZAM) and Climate Action 100+, positioning themselves at odds with their European counterparts who are demonstrating superior performance in these areas, as highlighted in the "Point of No Returns 2025" report.
- The landscape of politics plays a significant role in asset managers' engagement with climate-change and biodiversity issues, as evidenced by the shifting attitudes of US managers, with notable examples like BlackRock and State Street, who have introduced proxy voting services for pooled funds yet slowed their backing for climate resolutions in response to economic pressures.
