Best and Worst ESG Managers Revealed

    Stockholm (NordSIP) – There is no longer any excuse for poor ESG performance from asset managers.  ShareAction’s latest benchmarking report reveals winners and losers right across the market, whether large or small, active or passive or focused on equities or bonds.  The 2023 Point of No Returns report is an update on the activist non-profit organisation’s last such study of the world’s largest asset managers in 2020.  77 managers were assessed on their approach to governance, stewardship, climate, biodiversity and social themes, revealing some dramatic shifts within the overall ranking over the 3-year period between the ShareAction studies.

    ShareAction’s assessment of the peer group is generally negative, with only four managers scoring A or AA overall and more than a third of the cohort languishing in the D and E scores.  Even the top-rated managers show inconsistency across the various ESG themes, with biodiversity an area that clearly needs more attention.  Another point of concern is the fact that the very worst performers account for a disproportionately large percentage of global assets.  These include Morgan Stanley, Capital Group, BlackRock and Vanguard, with the latter one of only three managers to score an E overall.

    Movers and shakers

    One member of the Top 10 largest global asset managers to buck this trend is JP Morgan Asset Management, which found a way to jump from 71st to 13th over the 3-year period between reports.  This 58-place improvement is the best in the peer group, and the firm’s achievement of an overall B score should put positive pressure on other large US managers to follow suit.  Sweden’s SEB Investment Management is another stand-out performer with a 51-place jump up to an overall BB score, thanks in part to greater attention to climate and biodiversity issues.  Another US manager to drag itself out of the low scores is T. Rowe Price, whose attention to stewardship and social issues brought it an improvement of 45 places and an overall B score.  Other notable improvers are European managers Santander Asset Management and Deka Investment with 44 and 34-place moves up the ranking respectively.  These positive changes are broadly linked to the implementation of more effective policies and practices across the five themes evaluated by ShareAction.

    Bottom of the class

    Conversely, the rapid improvements achieved by these managers are starkly contrasted by a collapse down the rankings by some firms, including some unexpected major European names.  Allianz Global Investors falls 37 places to an overall score of D, and NN Investment Partners drops 28 places to CC.  PIMCO, State Street Global Advisors and PGGM also suffer similar fates.  Unlike the two US managers, Allianz, PGGM and NNIP had performed relatively well in the 2020 report.  ShareAction points to biodiversity as a particular weak point for these firms, who may also be laggards within a peer group that is improving fairly swiftly across the board.

    Smashing stereotypes

    ShareAction’s findings also help lay to rest certain sustainability stereotypes lingering within the investment industry.  Legal & General Investment Management’s (LGIM) 4th place ranking and A score demonstrate that passive investment strategies need not hinder a successful responsible investment approach – 67th place Vanguard take note.  LGIM does particularly well in terms of stewardship and engagement.  Fixed income specialists are also catching up with their equity peers, with the likes of French firm Ostrum and UK-based M&G working their way up to the B scores.  Some stereotypes do remain valid, with regional trends showing European managers consistently ahead of their US and Asian counterparts overall, despite the good showing of the likes of New York Life and Nomura.

    Leaders of the pack

    The Top 5 in the 2023 ranking presents little surprise, with almost no movement compared with 2020.  Schroders (BBB), LGIM, Aviva Investors and BNP Paribas (all A) are pipped to the post by Robeco, which retains top spot and the only AA rating among the 77-strong peer group.  Robeco also topped the rankings in terms of governance and stewardship, with Top 6 placings for climate, biodiversity and social issues helping to support its overall score.   Nevertheless, as ShareAction points out, there is always room for improvement with no firm yet managing to reach the maximum AAA rating.



    Image courtesy of Ryan McGuire from Pixabay
    Richard Tyszkiewicz
    Richard Tyszkiewicz
    Richard has over 30 years’ experience in the international investment industry. He has worked closely with major Nordic investors on consultancy projects, focusing on the evaluation of external asset managers. While doing so, Richard built up a strong practical understanding of the challenges faced by institutional investors seeking to integrate ESG into their portfolios. Richard has an MA degree in Management and Spanish from St Andrews University, and sustainability qualifications from Cambridge University, PRI and the CFA Institute.

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