Climate policy oversight among asset owners is lagging, according to recent research findings.
In a recent study by the independent think tank InfluenceMap, the world's largest asset owners have been found to have limited effectiveness in positively influencing climate policy. The research highlights that despite public commitments to net-zero and clean energy by some asset owners and companies, actual investment and policy influence often fall short or contradict these pledges.
The evaluation considered factors such as stewardship of climate lobbying, voting behavior, and direct and indirect climate policy engagement. UK insurer the Phoenix Group scored the highest in stewardship of climate lobbying, receiving an A-. However, three-quarters of asset owners scored a D+ or below in this category. The US pension fund Federal Retirement Thrift and India's Life Insurance Corporation had the lowest scores.
The research also acknowledged the fragmentation in investor stewardship and highlighted common standards like the Global Standard on Responsible Climate Lobbying and collaborative engagement through Climate Action 100+ as important. Some asset owners, such as CalPERS, NYCRS, NYSCRF, and Dutch pension fund ABP, demonstrated direct climate lobbying activities aligned with science-based pathways to limit warming to 1.5°C.
However, potential backpedaling on climate commitments, particularly in the US, poses a challenge for institutional investors. Only two asset owners, Aegon and NYCRS, were found to have engaged with asset managers on their stewardship practices regarding investee companies' climate lobbying. Adam Gillett, climate lead at UK pension fund Railpen, emphasized the importance of building policy advocacy into relationships with investee companies, issuers, and other external parties to have a "powerful multiplier effect".
The Net Zero Asset Owner Alliance, a group of asset owners committed to achieving net-zero greenhouse gas emissions by 2050, also stressed the importance of policy stewardship. A spokesperson for the alliance stated that asset owners must engage with their asset managers to effectively enact climate policy advocacy.
Climate-conscious investors are anxiously awaiting the climate policies that might result from the recent elections, as more than half of the world's population participated in elections in 2024. InfluenceMap's data suggests that while some large asset owners participate in initiatives like the Climate Action 100+ and the Glasgow Financial Alliance on Net Zero (GFANZ), their overall impact on advancing robust climate policies is undermined by widespread industry lobbying that favors fossil fuels and economic arguments against stronger climate measures.
In conclusion, while some progress has been made, there is still much work to be done for the world's largest asset owners to effectively influence climate policy and combat global warming.
- Despite the recognition of common standards like the Global Standard on Responsible Climate Lobbying and collaborative engagement through Climate Action 100+, the continuation of widespread industry lobbying that favors fossil fuels remains a significant obstacle for asset owners seeking to influence climate policy, as highlighted by InfluenceMap's data.
- As climate-conscious investors anticipate the potential impacts of recent elections on climate policies, it becomes crucial for asset owners like Aegon and NYCRS, who have already engaged with their asset managers on stewardship practices related to investee companies' climate lobbying, to continue their efforts in environmental-science-based investing and policy advocacy, as emphasized by UK pension fund Railpen and the Net Zero Asset Owner Alliance.
