Asset managers still investing in new fossil fuels

Since January 2023, more than $7.3bn of asset owners’ funds has been allocated to new debt issued by companies continuing to expand fossil fuels, according to a report by Reclaim Finance

Asset managers are continuing to invest in new bonds sold by companies that are expanding fossil fuel production, a report by non-governmental organisation Reclaim Finance has found.

These investment patterns are at odds with the industry’s broader collective concern around systemic climate risk, it says. Many of the world’s biggest asset owners have committed to net zero in their portfolios by 2050 and, as the Intergovernmental Panel on Climate Change and the International Energy Agency make clear, new fossil fuels are incompatible with this pathway, the report says.

Asset managers are supporting these companies financially and via votes at annual meetings, Reclaim Finance argues. Its analysts identified 25 asset managers that it says are failing to align their investment practices with climate science, including Amundi, Allianz Global Investors, and UBS Asset Management — all of which promote their ESG credentials elsewhere, including publishing sustainability reports.

A spokesperson for Amundi said that the asset manager “does not directly finance companies or projects”, but that “the collective objective of carbon neutrality cannot be achieved if we confine ourselves solely to approaches that exclude energy companies”. They pointed out that Amundi had voted at more than 9,000 AGMs in the first three quarters of 2024 in favour of 81 per cent of resolutions proposing additional climate requirements.

A spokesperson for Allianz GI said that the firm “believes that the best way for investors to ensure that oil majors become enablers of the global transition to net zero by 2050 is through concerted engagement . . . we believe divestment would do little to achieve this goal”. The asset manager makes use of the ‘“say on climate” tool to hold companies to account on their climate ambitions, they added.

UBS Asset Management did not respond to Sustainable Views’ request for comment.

Asset owners wield substantial influence within the financial ecosystem. Their capital allocations can redirect financial flows significantly, either advancing or hindering the energy transition, Reclaim Finance analysts say. As long-term investors, asset owners are acutely vulnerable to climate risks that threaten not only their returns but also the wellbeing of their beneficiaries, they add.

“Asset managers are entrusted with asset owners’ money, but they fail to follow through on managing climate risks,” Reclaim Finance sustainable investment campaigner Agathe Masson said in a statement. “Asset owners should look at how their money is being invested and challenge asset managers’ overall practices. Allocating new assets to fossil fuel developers will exacerbate climate change and increase climate risks for generations to come, which is in total contradiction with pension funds and other asset owners’ long-term horizon.”

German asset manager Union Investment stood out as a leader in its voting practices, opposing 80 per cent of resolutions seeking approval of actions by fossil fuel company boards. Reclaim Finance also highlights BNP Paribas Asset Management for its policy, announced in November 2024, to end new investments in bonds issued on the primary market by oil and gas exploration and production companies, effective immediately.

It is alone in this though: BNPP AM was the only asset manager assessed by Reclaim Finance that had done so, while 79 per cent of votes cast by all of the asset managers had been in favour of fossil fuel developers’ boards.

The NGO recommends that asset owners take a more proactive approach to influencing the behaviour of their asset managers, by asking their managers to only make new investments in fossil fuel developers if they agree to end expansion plans, and to request they vote against management proposals for companies that do not do so.

It also suggests that asset owners set clear timelines for ceasing relationships with asset managers that do not do this.

The report is available to read here.