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Stay or Sell? The $110tn investment industry gets tougher on climate




Financial Times: Ben Caldecott comments.

Some asset managers are tiring of quiet conversations with companies about emissions and are now threatening to divest

As Covid-19 ripped through the world in 2020, a cluster of senior figures at Aviva Investors, the £262bn UK asset manager, held a series of virtual meetings over the course of six months to discuss the other big issue looming over their portfolios: climate change.

Concerned that global warming would hit the long-term valuations of companies, the group decided on a rare course of action for a big asset manager. Aviva Investors warned about 30 fossil fuel intensive companies that if they failed to take radical action to slash their emissions, it would sell out across its equities and fixed income portfolios within one to three years.

It was a bold move that dramatised a growing dispute within the $110tn investment industry.

Many big asset managers still routinely dismiss divestment, arguing it is better to stay invested and try to alter corporate behaviour through background conversations with companies.

However, there are a growing number of large, traditional investors who are taking a tougher approach with companies over global warming, a change in attitude that could have huge ramifications for businesses around the world.

Ben Caldecott, director of the sustainable finance programme at the University of Oxford Smith School of Enterprise and the Environment, says one of the problems with the current model of engagement favoured by the investment industry is that few asset managers have a long-term plan around how to interact with businesses over climate change.

“There has been very little playing chess like a chess champion, where [asset managers are] thinking several moves ahead and coming up with proper strategies,” he says. “Very few are thinking about all the levers they have available.”

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