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An assessment of asset managers’ climate action

New analysis reveals asset managers’ complicity in fossil fuel expansion

Thirty major European and US asset managers have invested at least US$49 billion in bonds issued by fossil fuel developers, and over the last 18 months have made bought over US$3.5 billion in new fossil fuel bonds, finds a report by Reclaim Finance, ReCommon, Sierra Club and The Sunrise Project. The assessment also reveals that most asset managers undermine the engagement activities of their clients by failing to sanction polluting companies that continue to expand fossil fuels.

The report, Who’s managing your future? An assessment of asset managers’ climate action highlights which asset managers are taking advantage of the loosely-regulated bond market to buy fossil fuel bonds – and which are using debt as an engagement tool to push big polluters to decarbonise.

This year, asset managers were assessed on three main indicators:

  • Whether they have stopped purchasing new bonds issued by the biggest developers of new fossil fuel projects;
  • Whether they set the expectation for the companies they invest in to end fossil fuel expansion;
  • Whether they have sanctions in place in the case of non-compliance with this request.

“Asset managers continue to add fuel to the fire by buying the bonds from the worst fossil fuel polluters. Their policies are an inadequate response to the climate emergency. They should listen to the science and sanction companies that refuse to stop their devastating fossil fuel expansion plans. It is time for asset managers’ clients to challenge them on this issue and ask them to put in place robust policies to stop this scourge.”
– Lara Cuvelier, sustainable investment campaigner at Reclaim Finance

The parent groups of the 30 asset managers have invested US$3.5 billion in bonds issued in the last 18 months by some 40 companies actively involved in fossil fuel expansion. At least 21 of the 30 asset managers were found to have invested in the latest bond issued by TotalEnergies, the world’s 7th largest developer of new oil and gas supply projects, including the EACOP project. These figures are an underestimate because bond markets are notably opaque and investors seldom publish details of these transactions. This lack of transparency is even more problematic given that fossil fuel developers are increasingly seeking finance through the bond market.

Asset managers are able to invest in these bonds because of inadequate sectoral policies. The report reveals that while 10 asset managers deny debt to coal developers, none have stopped new bond purchases from oil and gas developers. Just one asset manager, Ostrum AM, asks oil and gas companies to halt their expansion plans. None have systematic sanctions in place to encourage oil and gas developers to change, either through votes or investment restrictions.

“We need to pay more attention to the bond market when we think about how oil companies like BP and TotalEnergies raise capital for their devastating climate projects. Asset managers have enormous power through their bond purchases and it’s time to ask them to flex their muscles and stop this flow of money to fossil fuel developers. There is a lack of transparency in these markets but it is crucial to shed light on this hidden support.”
– Lara Cuvelier, sustainable investment campaigner at Reclaim Finance

The US asset manager Vanguard has the highest level of investments in these new fossil fuel bonds internationally, holding at least US$1.2 billion in bonds recently issued by 19 major fossil fuel developers, including by ConocoPhillips, the company behind the oil drilling Willow project. The German group Allianz, parent company of PIMCO and Allianz GI, and the French group BPCE, parent company of Natixis IM, are the biggest European investors. They hold respectively at least US$193 million and US$122 million in bonds recently issued by major fossil fuel developers .

The NGOs publishing this report and the Toxic Bonds Network call on asset managers to immediately deny new debt to coal, oil and gas companies – and combine this with policies that set red lines on engagement with fossil fuel companies and use shareholder tools to sanction them accordingly. These findings should also be a wake up call for asset owners, who must stop working with asset managers continuing to invest in new fossil fuel bonds.


Who's managing your future?

By Reclaim Finance, ReCommon, Sierra Club and The Sunrise Project
Download report