Finding 8 – Despite improvements in some areas, biodiversity continues to lag behind other aspects of our benchmark.
Figure 4: Average scores across themes
Asset managers’ performance varied across themes. Biodiversity had the lowest average score of 33%, 14% below the overall average (Figure 4). This trend is consistent across regions. After stewardship and governance, the highest-scoring thematic section was social issues, with an average of 49%. The difference between the social and climate scores is due to a markedly stronger performance by North American managers on the former (47%) compared to the latter (33%).
Governance and stewardship
Asset managers are making progress on introducing governance mechanisms to ensure oversight of responsible investment-related issues compared to 2020. Two-thirds of asset managers reported that the board and trustees have responsibility for the oversight of responsible investment issues, up from 21% in 2020, although their responses revealed that their boards lack specific climate-related expertise. Asset managers have also started setting responsible investment-related key performance indicators (KPIs) and objectives that are linked to remuneration, though this most often applies to staff in responsible investment teams, and fewer than a third of managers have set such KPIs for all members of their executive board.
We also analysed asset managers’ stewardship practices and policies. 82% of asset managers had voting policies on climate, and 81% on social issues, up from 56% and 53% respectively in 2020. However, only 38% reported that their voting policies considered biodiversity. Biodiversity was also less well represented in engagement policies, with only 49% of policies referencing the topic, compared to 79% referencing climate and 70% mentioning social issues. When asset managers engaged, most reported that they use private methods, such as letter writing or meetings with companies. Over half of asset managers reported that they had divested or reduced holdings, or refused to purchase new debt, as part of an engagement process.
We will publish our full report on the 77 asset managers’ approaches to responsible investment governance and stewardship in the first quarter of 2023, in time for the 2023 AGM season. This will be published on our Investor Hub and shared on our social media channels.
Figure 5: Types of policies used across climate, biodiversity, and social investment issues
Many asset managers have responded to the urgent need to act on climate. 22% had dedicated climate-related investment policies, while the other themes are more likely to be included in a general policy (Figure 5). Only 10% reported that climate was exclusively an investment consideration for funds or mandates labelled ‘ESG’ or similar – significantly fewer than for biodiversity and social issues.
Even though climate policies are increasingly common, there is still room for improvement. Only slightly more than half (53%) of the surveyed asset managers reported having set a public net-zero target for 2050 at the latest. Fewer than a quarter (22%) have published a climate transition plan, which is a time-bound action plan that clearly outlines how an organisation will transition its existing assets, operations, and business model towards a trajectory aligned with credible science-based pathways. 12% reported they do not yet intend to publish such a plan. 42% said that they intend to publish a plan in the future and 16% wanted to do so within 12 months of completing the survey.
Only 10% of asset managers reported having a dedicated biodiversity policy covering all portfolios under management, and 34% reported having a general responsible investment policy that includes biodiversity issues for all portfolios under management. A quarter of asset managers said that biodiversity is exclusively an investment consideration for funds or mandates labelled ‘ESG’ or similar – more than for climate or social issues.
There is a lot of room for improvement. 40% of asset managers do not monitor whether investee companies operate in areas of global biodiversity importance; 20% monitor this, but do not have any asset manager-wide restrictions. 62% did not report having made any commitments regarding the conversion and protection of ecosystems. The most common biodiversity commitment, made by 14% of asset managers, is the No Deforestation, No Peat, and No Exploitation commitment.
This was the first time our survey covered not only human and labour rights-related topics (for example, decent work, forced labour, war and security), but also public health (including worker, consumer, and community health topics). Dedicated investment policies on social issues are rare: only 5% of asset managers reported having a dedicated social policy that covers all portfolios under management. Just over half of asset managers (51%) reported having a general responsible investment policy that includes social issues for all portfolios under management. 19% reported that social issues are exclusively an investment consideration for funds and mandates labelled ‘ESG’, ‘responsible investment’, or similar.
While 90% and 86% of asset managers have social policies that cover human rights and labour rights, respectively, 61% also have a public health-related investment commitment. Though this is often a tobacco- or alcohol-related exclusion, this topic is clearly growing in importance, and we hope it will continue to be elevated to reach a status comparable to human and labour rights.
Overall, the most common exclusions are related to controversial weapons, consumer health issues, and the violation of human and/or labour rights in companies’ direct operations. Only a minority of asset managers considered other critical emerging social themes, such as the ethnicity pay gap or community health issues.
We will release our detailed reports on the 77 asset managers’ performance on climate, biodiversity, and social issues in the second quarter of 2023.
Leading practice: BNP Paribas Asset Management’s policies on social issues, biodiversity, and climate
BNP Paribas Asset Management placed in the top 10 managers on all five sections of the survey, and achieved the highest combined score across the three thematic sections: social issues, biodiversity, and climate. These three themes are covered by its integrated Global Sustainability Strategy.
On social issues, BNP Paribas Asset Management reported having commitments and integration strategies on diversity and inclusion, freedom of association, grievance mechanisms, modern slavery, and controversial weapons, among others. The firm also stood out for its integration of public health considerations into investment decisions and exclusions policies, as well as for its detailed policies that restrict investment in sovereign actors engaged in human rights violations.
On biodiversity, BNP Paribas Asset Management goes beyond simply monitoring operations in areas of global biodiversity importance. It reported that its policy places restrictions on operations by not investing in companies developing new sites in certain areas. It also makes investment in certain sectors (palm oil, pulp, and agriculture) conditional on additional biodiversity due diligence.
On climate, the asset manager has set a public net-zero by 2050 target which is aligned with the Intergovernmental Panel on Climate Change’s 1.5C scenario with no or limited overshoot. It has made a commitment to exiting coal, with the aim of excluding mining companies that do not have a strategy to exit thermal coal activities and power generators that still have coal capacity in their generation mix in 2040 worldwide (2030 in EU and OECD).
We will provide further information on these policies in our detailed thematic reports.
 For more detail on asset managers’ voting performance, see ShareAction’s Voting Matters report, published in January 2022: https://shareaction.org/reports/voting-matters-2022
 In our survey, we defined climate-, biodiversity-, and social issues-related investment policies as “a statement that sets out the asset manager's approach to integrating [climate/biodiversity/social] concerns in their investment decisions (e.g. screening, due diligence, and positive tilts). This is separate from voting and engagement principles. A policy can be standalone or integrated as part of a wider responsible investment policy.”