The UK workplace pension scheme NEST has said it is in discussions with all of its external managers that have exited the climate groups Net Zero Asset Managers (NZAM) initiative and Climate Action 100+ (CA100+).

Diandra Soobiah, director of responsible investment at NEST, said she is concerned that managers’ reporting about their climate engagement may become less open and consistent in connection with the retreats from the collaborative initiatives.

Concerns around the wave of key signatory departures from both groups, including BlackRock and Northern Trust Asset Management, have thrown into question how this may influence manager selection decisions by European asset owners.

According to NEST’s website, it uses BlackRock, Northern Trust, and JP Morgan Asset Management as external managers, among others. The fund did not, however, confirm with which specific managers it was having discussions.

AP7, the largest of Sweden’s hefty national pension funds, has already indicated that implications of BlackRock’s decision to quit NZAM could affect whether it renews the estimated €28bn of its investment mandates the world’s largest asset manager currently runs.

Additionally, the Dutch technology industry scheme PME is also considering ditching BlackRock as its asset manager because of the firm’s “retreat from responsible and sustainable investing”.

Speaking at the Investment Associations (IA) stewardship and corporate governance forum this week, Soobiah said that while NEST understands the pressures asset managers are facing, it remains committed to its own objectives for driving change at portfolio companies.

“We will be looking for evidence that the managers’ engagement with companies on climate change objectives is continuing and that they are tracking progress,” she said.

Soobiah added that while it is too soon to say whether NEST will be reviewing its relationship with managers that have departed from the climate groups, the fund is ‘closely monitoring’ the situation.

Last year, NEST said it was considering freezing new investments into companies that were not meeting net-zero expectations.

The potential sanction was outlined by Katharina Lindmeier, senior responsible investment manager at NEST, in the report published by the Defined Contribution Investment Forum (DCIF) – The Path to Net Zero – which explores various pension schemes’ transition efforts.

A NEST spokesperson has said that while the scheme was still considering an investment freeze, “NEST does not take such steps lightly and would prefer to work with companies to help them set actionable targets toward decarbonisation and the path to net zero”.

Soobiah also highlighted the fragmentation in stewardship and the misalignment in the investment chain, noting a decline in collaboration between asset owners and asset managers.

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