Asset managers failing to utilise shareholder engagement with fossil fuels

January 5th, 2023

Asset managers that finance fossil fuel expansion are failing to effectively employ shareholder engagement tactics.

Asset managers failed to translate their words into actions at fossil fuel company AGMs in 2023, according to new research from Reclaim Finance.

The NGO and campaigning organisation’s analysis of AGM votes at 75 fossil fuel companies in 2023 found that engagement on climate issues was “cosmetic at best”. It also said asset managers are failing to consider climate concerns in key strategy votes.

Asset managers were assessed on their votes on a variety of issues. This includes Say on Climate proposals, climate-related shareholder resolutions and re-election of board members.

Despite almost all of the asset managers having joined the Climate Action 100+ investor coalition, the analysis showed that all continued to support companies’ fossil fuel expansion plans.

Agathe Masson, stewardship campaigner at Reclaim Finance, said: “Asset managers talk a good game when it comes to climate engagement, but when it comes to walking the talk, they seem to have forgotten the aim of the game.”

Similarly, environmental charity ClientEarth highlighted that many of the largest pension providers were “failing to use a critical financial lever” in their engagement with fossil fuel companies.

The organisation wrote to the UK’s 12 largest pension funds noting that they are yet to focus on their bond investments, which are a much bigger yet lesser-known source of fossil fuel financing.

Data from the Toxic Bonds Initiative shows 50% of fossil fuel financing comes from corporate bonds. These bonds account for the largest source of financing for coal in China and India.

The charity warned the pension funds they could face legal repercussions if their bond investments continue to finance fossil fuels.

Pensions funds’ existing legal duties require pension schemes to protect their beneficiaries from financial risk. Climate change poses an existential threat to the sector.

Last month, a new report from the Forests & Finance Coalition found major banks are financing deforestation and biodiversity loss.