On the go: Despite a flurry of commitments by fund managers towards achieving net zero emissions by 2050, only 22 per cent have a solid plan for reducing their carbon output, according to new research.
Analysis from XPS Pensions Group of information provided by 63 managers covering 255 funds showed the proportion of these companies that have made pledges towards net zero almost doubled in 2021, soaring to 81 per cent from 41 per cent in 2020.
However, only one in five of the managers were able to set out a “credible plan” for meeting their net zero goals, the consultancy noted.
Just under a third of companies could not provide any examples of how they integrated environmental, social and governance concerns into their funds.
While XPS observed a small increase in the managers’ ESG capabilities, with the proportion of funds achieving “green” ratings edging up to 24 per cent from 23 per cent, 2 per cent of funds received “red” ratings — up from 1 per cent in the previous period.
Alternative asset classes also have ground to make up, the consultancy warned. Secure income, diversified private markets, and real assets were the worst-scoring asset classes in 2021, scoring lower than in 2020. This decline was largely driven by poor ratings on stewardship and reporting, while low-carbon data coverage was also a concern.
“Despite the emergence of anti-ESG sentiment in the past year, it remains our view that integrating consideration of ESG factors into investment decisions is a critical part of sustainable, long-term investment practice,” said XPS head of ESG research Alex Quant.
“We appreciate that a lot of effort is being spent in this area across the investment management industry. However, it’s clear that there remain areas for improvement, particularly around considering climate change and reporting back to stakeholders on ESG outcomes.”
