Yahoo Finance Canada's money managers mirror ESG backtrack on Wall Street: report
Canadian managers' support for climate-relevant shareholder resolutions in 2022 fell sharply
North America's largest asset managers pared back climate-friendly actions last year, a trend coinciding with anti-ESG (environmental, social, and governance) backlash from American lawmakers, according to a new report.
U.K.-based think tank InfluenceMap says it analyzed 45 of the world's largest asset managers, a group with US$72 trillion in assets under management. Its report, released on Monday, points to a "significant gap between the increase in net-zero commitments by the world's largest asset managers and their lack of meaningful short-term climate action."
"Particularly, the ambition of U.S. asset managers appears to have decreased, reversing an upward trend up until 2022," InfluenceMap's authors stated. "This reversal coincides with the recent 'anti-ESG' trend in the country, with some state legislators seeking to limit investors' use of ESG factors, and the phase-out of fossil fuel investments."
The report found asset managers globally hold almost three times more stock in fossil fuel companies than in green investments, while "stewardship efforts appear to have stagnated, contributing to continuously climate-misaligned portfolios."
It also notes support for climate-focused shareholder resolutions by North American money managers dropped to 36 per cent last year, from 50 per cent in 2021. Their European peers were found to have supported 76 per cent of such resolutions in 2022, on average.
While the report's authors do not attempt to pinpoint the cause of the shift, they say the change coincided with several U.S. state governments discouraging the use of ESG factors by financial institutions, and in some cases, imposing limits on business with financial firms that boycott fossil fuel investment.
"While some asset managers have stated high-level concerns, most of the sector has not mobilized to combat these efforts," the authors wrote.
InfluenceMap program manager Daan Van Acker says the Canadian firms included in the study - Sun Life Financial Inc. (SLF-PC.TO), Manulife Financial (MFC.TO), Royal Bank of Canada (RY.TO), Toronto-Dominion Bank (TD.TO), Scotiabank (BNS.TO), and Bank of Montreal (BMO.TO) - ranked in line with their American counterparts.
Toronto-based Manulife, for example, had the fourth-highest portfolio weighting of fossil fuel companies to green companies.
"Similar to the U.S., Canadian managers showed a steep drop in support for climate-relevant shareholder resolutions in 2022," Van Acker told Yahoo Finance Canada in an email. "The average Canadian manager supported 58 per cent of such resolutions in 2021, but only 38 per cent in 2022."
He says Canadian managers' portfolios are similarly misaligned with net-zero goals as those of U.S. managers, with scores in the same range as BlackRock (BLK), Vanguard, Fidelity Investments, and State Street (STT).
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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