04 July 2022
[This article was updated on 6 July to add details on the selection process for those asset managers assessed]
US asset manager Federated Hermes scored highest for environmental, social and governance (ESG) integration among major investors in a study by a credit rating agency.
European credit rating and ESG analysis firm Scope said its study demonstrated that the $630 billion asset manager had a "very comprehensive and binding" ESG strategy which resulted in its scoring 101 points out of a maximum of 116.
Federated Hermes came out just ahead of $180 billion asset manager Candriam on 99 points. Neuberger Berman, Robeco, and HSBC Global Asset Management completed the top five firms analysed with scores of 90, 89 and 87 respectively.
Scope assessed 42 large fund managers who report through the UN Principles for Responsible Investment (PRI) – including 30 international firms and 12 German companies – with combined assets of around €44 trillion ($46 trillion).
The German agency assessed ESG investment integration at these firms across 58 topics, including 43 on investment processes and corporate governance and 15 on investment engagement. For each topic, asset managers could score up to a maximum of two points each.
The firm only published the scores for the 10 firms whose PRI reports provided the most detailed answers to questions related to all 58 topics for this initial study, however. Scope Fund Analysis managing director Said Yakhloufi told Environmental Finance a fuller analysis including more asset managers is expected to be published in late 2022 or early 2023.
Among the evaluation criteria were whether 'E', 'S', and 'G' factors were considered equally in company analysis and research, whether a systematic process existed to identify and prioritise ESG engagements and whether this was utilised before, during and after investment, and whether senior management and investment team remuneration was linked to implementing and monitoring the ESG investment policy.
Yakhloufi said none of the asset managers assessed achieved "flawless" results as the requirements they set for them to demonstrate "comprehensive" sustainability integration and engagement efforts were "simply too high".
"However, some large companies are on the right track and are proving that they can keep pace with the growing requirements for sustainable investment and gone a long way in their ESG integration," Yakhloufi said.
AllianceBernstein, Axa Investment Managers, Amundi, Union Investment and Franklin Templeton Investments completed the analysis table with scores ranging from 86 to 71, respectively.
In its commentary praising Federated Hermes, Scope said that "ESG information and engagement are mandatory components of all investment decision-making processes" at the firm and that "this approach is supported by exemplary ESG integration into the respective investment process with proprietary tools".
Scope said that New York Life-owned Candriam actually performed better than Federated Hermes in the integration of ESG in its investment process, but performed "slightly worse" than its US rival on ESG engagement.