Fund Solutions

Wide Range Persists in Funds’ Environmental Performance

Climetrics rankings reveal strong performance by leading French asset managers.

A significant gap remains between the best and worst performance of funds on environmental criteria, with only a few asset managers demonstrating strong climate leadership, said sustainability disclosure platform CDP, releasing the fourth annual fund awards of its fund rating arm Climetrics.

Climetrics provides monthly ratings of 18,000 funds, representing more than €15 trillion or around 30% of the global investment fund industry’s total assets. Its awards rank the performance of funds based on the scoring of portfolio companies, the asset manager’s environmental action, and its investment policy.

More than 30% of the funds it rates are in the lowest two categories and on average have underlying scores that are 70% lower than the top 20 funds.

CDP’s corporate data on climate change, forests and water security – including CDP temperature ratings – as well as data from the Science Based Targets initiative and the Assessing Low Carbon Transition initiative are used for the rankings.

“Consistent performers”

Awards were given to the top five funds in each of the global, European, emerging markets and US equities asset classes. The winning funds included those sold by Abrdn, Allianz, AXA, HSBC, La Banque Postale Asset Management, Schroders and Swedbank. Fifteen of the 16 winning managers are members of the Net Zero Asset Managers initiative.

La Banque Postale Asset Management (Federis ISR Euro, Federis ISR Actions US and ISR Actions Amerique) and Mirova (Global Environmental Equity, Europe Environmental Equity, US Climate Ambition Equity) were the only two managers with three winning funds each.

Climetrics said the two managers are “consistent performers”, having won 23% of all fund awards since the Climetrics Fund Awards began in 2018. Overall, French asset managers continue to dominate, with 40% of all 2021 awards, illustrating their superior performance in the transition to a net-zero economy, said Climetrics.

In its methodology, Climetrics puts most weight (85%) on the portfolio holdings of each fund, therefore, active investment decisions by fund managers have a strong impact on the overall rating. Likewise, the asset managers of the top-rated funds have all passed a minimum scoring threshold for their climate stewardship.

This assessment measures the asset manager’s public action on climate change – for example their own disclosure, their commitments, participation in global initiatives such as the Net Zero Asset Manager initiative, ClimateAction 100+, and the Principles for Responsible Investment. Only around 10% of asset managers with funds rated by Climetrics achieved the necessary threshold for a fund to have the top rating.

According to the CDP, the ratings and performance of funds is still highly influenced by poor transparency among underlying companies on their full environmental impact, including “a lack of clear target-setting to align business models with a 1.5C, nature-positive world among the majority of global businesses.” But a large number of funds are also marked down for their continued investment in fossil fuel companies, especially in emerging markets.

Nico Fettes, Head of Product Development at CDP Europe, said the vast majority of global funds do not yet support the urgent global transition to a 1.5°C-aligned economy.

“We do not have time to waste. The fund industry – and individual investors – simply must start driving capital into the companies of the future. That’s why it is critical that investors big and small can easily find the very few funds that are currently walking the talk with excellent environmental performance,” he said.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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