Stockholm (NordSIP) – Asset manager Federated Hermes recently came under fire from some of its clients over the firm’s sponsorship of the US State Financial Officers Foundation (SFOF). Although Federated Hermes has made a name for itself as an ESG leader, its status as a “Gold” sponsor of an organisation that has aggressively lobbied against climate mitigation efforts and that is an active participant in recent efforts by some US states to demonise ESG investment caught the attention of two of its major Danish pension fund clients.
Anders Schelde, CIO of AkademikerPension expressed his dissatisfaction with the firm’s formal statement on the matter, which stated “we do not set the agendas for these organisations; rather, they operate according to their unique charters and the views of their members and elected leadership. Our participation does not serve as an endorsement of any organisation’s particular perspective on any issue.” Quoted in the Financial Times, Schelde said “it just doesn’t add up, in our view,” a position shared by Danish pension fund P+, whose Head of ESG Kirstine Lund Christiansen urgently requested clarification from the asset manager. Federated Hermes was also the target of climate demonstrators at a local government pension scheme conference in the UK.
Faced with a barrage of criticism, Federated Hermes appears to have reconsidered its position regarding the SFOF. Although the ongoing sponsorship deal will remain in place, the firm has announced that it will not be renewed. Anders Schelde cautiously welcomed the news, telling NordSIP that “it’s positive that Federated Hermes has decided not to renew its sponsorship of SFOF in light of the latter’s aggressive opposition to ESG and climate denialism. Questions remain regarding when the sponsorship will be terminated, and we have also asked Federated Hermes to review all of its other memberships and sponsorships to make sure they know their exposure to similar risks of misalignment with their fundamental values and commitment to the goals of the Paris Agreement.”
Kirstine Lund Christiansen, Senior Vice President and Head of ESG at P+ was also encouraged by the shift in position, explaining to NordSIP that “P+ is a client of EOS, who is owned by Federated Hermes. We have been in dialogue with EOS on the matter since this summer. Federated Hermes have decided not to renew their sponsorship of SFOF, which we find very positive. The current sponsorship will end by next year, and thereafter it will not be renewed.”
The ramping up of the increasingly aggressive anti-ESG movement in the United States appears to have taken Federated Hermes by surprise, as certain State institutions’ previously implicit support for the fossil fuel industry has become more vocal and extreme. For most European institutional investors like AkademikerPension’s Schelde, appointed external managers must be aligned with global climate targets not only in their investment portfolios but also in their relationships with industry bodies: “If misalignment is found, we ask for transparency and a strategy to influence or terminate the misaligned organisations. It’s key for us that they are consistent with the asks of companies under Climate Action 100+, and with what we have asked of companies like BHP, Chevron, Toyota etc in shareholder proposals in the past.”
With asset management firms such as Fidelity Investments and Invesco also listed as SFOF sponsors, this issue has brought to light the potential discrepancies in large multi-national firms, where the right hand may not know what the left one is doing when it comes to a consistent and coherent net-zero commitment. This will undoubtedly spur on asset owners and non-governmental organisations (NGOs) in their efforts to closely scrutinise their external managers’ affiliations and sponsorships.