Climate advocacy of biggest insurers and pension funds under fire

The world’s largest insurers and pension funds are failing to use their influence to promote climate action, even though the majority – 22 out of 30 – have set net zero commitments, new analysis has found.

In principle, the combination of asset owners’ long-term investment horizons and their influential position in the financial system make them potentially powerful advocates for government policy to achieve international climate goals.

However, analysis of institutional asset owners with US$17 trillion under management between them, published today by think tank InfluenceMap, finds that no asset owner has fully exploited all its levers of influence to push for government policy action to achieve net zero by 2050. Indeed, the majority are abdicating responsibility, the report warns.

Lack of stewardship and transparency

The levers available to asset owners to affect policy change fall into two categories: their stewardship practices over investee companies’ lobbying, and their own efforts to influence climate policy, either directly or via industry associations.

The research finds there is an overall lack of stewardship on climate policy engagement among asset owners, with around three quarters (73%) scoring a D+ or below according to the analysis. Generally, low scores are driven by low levels of transparency on stewardship activities.

Only 13 of the 30 asset owners assessed (43%) have mentioned policy engagement in their stewardship policies and processes. Meanwhile, just six have started to integrate climate-related policy engagement more systematically into their policies.

The analysis also found that 60% of asset owners provide either only summary statistics about engagements or no details at all about stewardship, including six which are members of the Net- Zero Asset Owner Alliance (NZAOA), an industry initiative whose members commit to advocate for “public policies for a low- carbon transition of economic sectors in line with science.” 

'Asset owners ceding their influence'

Cleo Rank, Programme Manager at InfluenceMap said: “Although it is encouraging to see a few asset owners actively stewarding companies and asset managers on climate lobbying, and engaging in robust direct policy advocacy, these entities represent only a fraction of the sector. 

“By failing to engage, many asset owners are ceding their influence to more actively engaged industry associations that are often advocating against meaningful change. The commitments of groups like the Net-Zero Asset Owner Alliance are at risk of being undermined if their members do not fully buy in to its recommendations.”

A report published last month by The UN High Level Expert Group on Net Zero - Integrity Matters: The Hard Work is Now – that stresses the importance all non-state actors should place on aligning lobbying and advocacy with 1.5°C in their net-zero transition plans. 

The report says leaders on stewardship include Phoenix Group, Aegon, and the New York City Retirement Systems (NYCRS), which have led collaborative engagements and filed shareholder resolutions on climate lobbying at investee companies, and have engaged with, or are monitoring, their asset managers to improve stewardship on climate lobbying on their behalf.

Three quarters (76%) demonstrate policy engagement that is at least partially aligned with science-based goals. However, almost all (93%) fall under the threshold for ‘strategic engagement’, leaving the bulk of impactful policy engagement to the more active industry associations.

Misaligned climate advocacy

The analysis also highlights an alarming level of transparency around climate advocacy;  no asset owner is fully transparent around its indirect lobbying via industry associations. Meanwhile, seven of the 30 asset owners analysed maintain links to industry groups whose climate policy advocacy is misaligned with science-based pathways to limit warming to 1.5°C, and who have actively obstructed climate policies for the financial sector and the real economy, InfluenceMap says. 

Allianz, Prudential Financial, MetLife, and AIG are members of The US Chamber of Commerce, a group that previous InfluenceMap research has ranked as one of the most obstructive industry associations globally that has engaged in opposition to climate-related policies that its asset owner members appear to support. 

Leaders in direct climate policy engagement include the New York City Retirement Systems (NYCRS), the New York State Common Retirement Fund (NYSCRF), and the California State Teachers’ Retirement Systems (CalSTRS). They advocated for policymakers to protect investors’ abilities to consider climate factors in decision-making, supported the SEC’s climate disclosure rule, and directly advocated for real economy climate policies including EPA GHG emission standards and bans on new fossil fuel infrastructure.