Asset Managers Increasingly Support Fossil Fuel Development
But if asset owners want to protect their long-term investments from climate impacts, they need to ensure their asset managers stop funding companies and activities that fuel the climate crisis. So far, too many owners are not taking action. New research shows that most major asset managers continue to support companies developing new fossil fuel projects. By providing both capital and support to corporate boards that enable these projects, asset managers’ investment choices exacerbate climate risks in their clients’ portfolios, often prioritizing short-term profits.
The 30 asset managers assessed in a recent Reclaim Finance report invested more than $17 billion in bonds issued by fossil fuel developers between January 2024 and June 2025, making them a major source of financing for fossil fuel expansion. Even worse, their investments in the oil and gas sector increased by 78% compared to the previous year, a decision that will only compound climate risks in clients’ portfolios. Vanguard and BlackRock were the two biggest fossil fuel bondholders, with $4.2 billion and $2.9 billion invested in recent bonds issued by fossil fuel developers, respectively.
At the same time, these asset managers are failing to use their shareholder power to oppose climate-damaging strategies. Some 81% of the votes cast by these 30 asset managers approved the actions and reelection of board members at these fossil fuel companies, effectively endorsing continued expansion and discouraging strategies to reduce emissions.
A few asset managers have reduced support for fossil fuels, demonstrating that investors can indeed opt for a decarbonization strategy. For example, French manager Ostrum AM has not invested in any recent bonds issued by major fossil fuel developers, and German manager Union Investment cast 95% of its votes against the board of directors of fossil fuel developers in 2025.
Investments in Climate Solutions
Meanwhile, global investors are failing to support the companies and projects needed for the low-carbon transition. Estimates suggest that financing the transition will cost about $4.4 trillion annually for clean energy alone, and between $7 trillion and $9.2 trillion annually when accounting for broader economy-wide infrastructure needs. Despite capital markets managing over $1 quadrillion, global investments are falling well short of what will be needed to decarbonize the economy. A recent Sierra Club report, for example, found that only 16% of surveyed US pensions have a dedicated strategy to invest in climate solutions. Without also accelerating investments in climate solutions, asset managers are further failing to protect their clients’ portfolios from growing climate-related risks.
Asset Owners Can – and Must – Choose Climate Action at a System Level
Given that climate change is a pervasive, global threat, its risks require systemic solutions. Addressing companies case by case will not tackle the wider, economy-wide risks. Asset owners must therefore shift their focus to strategies that drive change across the financial system.
To this end, asset owners must adopt four key priorities:
• Money should not go to companies engaging in fossil fuel expansion. Investors must stop investing in new bonds issued by these companies to halt new projects and the additional emissions they generate.
• Investors must simultaneously pursue investments in a range of climate solutions across their portfolios.
• Investors must use all the shareholder engagement tools at their disposal to halt fossil fuel expansion. Voting against management resolutions, particularly the re-election of directors, must be standard practice as long as those companies are pursuing fossil fuel expansion.
• Asset owners must use their influence as clients to push asset managers to apply these measures. Dialogue alone is not enough. Asset owners must set out clear consequences for asset managers who do not show significant progress. And decisions about which asset manager to work with for all new delegated investments must systematically account for ongoing support for fossil fuel expansion.
Leading US and European asset owners have already made progress on this, showing it is possible to break with asset managers over concerns about the management of climate-related risks: former New York City Comptroller Brad Lander recommended three of the city’s pension funds end their $42 billion relationship with BlackRock because of its inadequate decarbonization plans; Dutch pension funds PFZW and PME both recently withdrew mandates from BlackRock over sustainability concerns; and The People’s Pension withdrew its mandate from State Street. But most asset owners continue to remain silent.
With climate impacts intensifying, asset owners must act now to reduce financial climate risk. They cannot ignore their duty to protect the climate or their investments.
Article by Agathe Masson of Reclaim Finance and Jessye Waxman of the Sierra Club
Agathe Masson is a Sustainable Investments Campaigner at Reclaim Finance, a non-governmental research and campaigning organization that aims to make finance work for the climate. She assesses investors’ climate practices and raises awareness ofsystemic climate-related financial risks. Before joining Reclaim Finance, she was a senior consultant in sustainable finance.
Jessye Waxman is a Campaign Strategist and Advisor for the Sierra Club’s Sustainable Finance campaign. Her work includes developing best practices for mitigating climate-related risks, regulatory and industry engagement, and public advocacy. She previously held staff and/or advisory roles for Green Century Capital Management, Majority Action, and Principles for Responsible Investment.
Article reprinted with Permission as part of GreenMoney’s ongoing collaboration with Climate and Capital Media.