In a previous post, we discussed the Net-Zero Asset Managers (NZAM) Initiative, which highlighted the necessary changes required from the global economy to transition away from Oil & Gas and various commitments to achieve this. How are the managers doing? A report from Carbon Tracker finds that despite this commitment and position statement, the 25 members of the NZAM Initiative continue to invest in Oil & Gas, with the largest NZAM members ‘heavily invested in unaligned oil and gas companies’.
The report finds that over 160 investment funds are labelled as sustainable, ‘yet they hold a combined $4.5Bn of investment in Oil & Gas companies’. It also finds that voting data suggests that managers tend to not support 1.5°C-aligned resolutions, despite arguing that an active engagement strategy is what they employ. Carbon Tracker notes that this may mislead current and potential asset owners, as the NZAMs claim to be interested in divestment or engagement even while they hold equity in 15 of the largest global oil & gas firms. It would therefore appear that NZAMs have labelled investment products and their strategies as climate friendly — in an effort to meet asset owner demand for so-called green and sustainable investments.
Important to note this research seems to take a divest OR invest and engage view - there is a third path some asset owners and investors take using time-varying climate change indices, like those from MSCI, or transition indices, like those from JP Morgan, where the exposure to carbon producing companies changes over time in line with some standard (such as those from the European Union).
For our faith-consistent investors, we would like to highlight regulatory changes that are on the horizon this year, which will increase the scrutiny that asset managers have to operate under. We highlight SEC (US) & FCA (UK) changes in previous posts. Changes will look to increase climate disclosures and crackdowns on contradictory voting practices which are not in alignment with stated policies. In the meantime, our FCI members should look to clearly express their beliefs, teachings and values in their voting preferences (to asset managers) and their investment policy statements.