Under the Global Divestment Day taking place this weekend, Swedwatch has published a study that aims to examine how asset managers integrate climate considerations into fund management, and how this is communicated to customers. Swedwatch has collaborated with South Pole Carbon in gaining comprehensive data on the potential climate impacts created by funds.
If our climate is to be stabilised, it is critical that the financial markets move investments from carbon-intensive companies to “climate solution companies”. Additionally, asset managers should encourage companies to take on better climate work. Options for climate-smart investment are already available on the fund market today in the form of, for instance, green bonds and sector funds with a focus on renewable energy and energy efficiency. Nonetheless the majority of funds managed do not take explicit account of climate: there are still large sums invested in companies extracting, producing and prospecting additional reserves of coal, oil and gas.
For the study, Swedwatch established climate estimates for a sample of 28 funds for small investors and interviewed representatives of the ten largest asset management companies in Sweden concerning how climate change is integrated into fund management. The study is mainly aimed at asset managers but provides guidance to investors and policy makers interested in climate issues.
The primary recommendation for savers is to use their consumer power to request information and demand that climate consideration is integrated throughout all fund management. Savers should not be satisfied with asset managers who only take climate change into account in minor parts of their fund range. With regards to policy makers, Swedwatch recommends that they introduce formal requirements for climate analysis and action plans for asset managers throughout the fund management sector, as well as in the corresponding reporting to investors. Formal requirements and action plans would create incentives for investment managers to develop their methods so that real climate improvement would be achieved. It would also make it possible for savers to exercise their consumer power as they would have access to comparable information on asset managers’ climate commitment.