European and UK pension funds drive transatlantic cut up on sustainable investing

European pension funds and other long-term asset owners say they are doubling down on sustainable investing, even as the latest data shows some asset managers are still retreating from so-called environmental, social and governance investing after a political backlash in the US.

Large pension funds, including the £33bn UK People’s Pension, the €60bn Dutch industrial workers’ PME fund and the PGGM group, which manages €250bn in pensions for workers including those in the healthcare sector, have already pulled money or put asset managers under review over concerns about their record on sustainability.

Investors and pension consultants, who provide advice on which asset managers to use, told the Financial Times they expected more mandates to change hands in the months ahead as it became easier to identify and assess which asset managers were taking sustainability seriously.

PME is reviewing a €5bn mandate with BlackRock over concerns about climate change and the US asset manager’s voting record at annual meetings. It said asset owners were “becoming increasingly critical of asset managers that distance themselves from ESG.”

“It is no secret that a couple of European asset owners already pulled funds from US managers — I think this is an early phase of a broader movement,” said Daan Spaargaren, responsible investment strategist at PME.

PGGM, which oversees pension assets for 3mn people in the Netherlands, is also among the large investors that are in the process of switching asset managers, with sustainability as one of its main metrics.

“Risk, returns and sustainability are all three equally important for the trustees,” said Lars Dijkstra, chief investment officer at PGGM, adding “the energy transition itself won’t stop, it is our fiduciary responsibility to take the associated risks seriously”.

Danish pension fund AkademikerPension, which manages DKr150bn ($22.7bn), ended a DKr3.2bn mandate recently with State Street, as it moved more money in-house.

“We would have terminated the mandate anyhow because of a looming downgrade of State Street in our internal ESG-rating system, due to a growing discrepancy between their and our approach to climate risks and climate investing,” said Anders Schelde, chief investment officer at AkademikerPension.

But he also noted that achieving strong returns in the present economic circumstances was a challenge. The pension fund set a target for 22.5 per cent of its total portfolio to be in climate-related investments by the end of 2030.

Schelde said this might not be achievable, however, as potentially investable projects were taking longer to develop during a period of high interest rates and economic uncertainty.

Many US asset managers have also pulled back on sustainability issues as a result of political pressure, including lawsuits from Republican-controlled pension funds and treasuries, while Trump has taken aim at climate action and diversity, equity and inclusion programmes.

Few out of 76 asset managers reviewed met basic sustainability standards, the responsible investment non-profit group ShareAction found in a report released on Wednesday.

A gulf was growing between the record of European and US investment houses, and the report highlighted the widening gap when it came to voting on ESG issues at annual meetings as an example.

Nordea, Axa Investment Managers and BNP Paribas Asset Management were among the top performers, while BlackRock, State Street and Vanguard all received E grades — the second-lowest score.

In response, BlackRock said it offered dedicated climate and decarbonisation stewardship for clients who wanted it in separate accounts, and supported those who had set their own goals.

State Street also said it provided services to match client “investment objectives and preferences”, including on proxy voting and company engagement, via a new stewardship service.

Asset managers were being “compelled to come off the fence and clearly set out what actions they’re taking and why”, said André Ranchin, investment consultant and biodiversity lead at Hymans Robertson.

Jane Ambachtsheer, global head of sustainability at BNP Paribas AM, said the French investment house was “seeing strong interest” from European institutional and wholesale clients who “maintain a desire to work with asset managers that demonstrate strong leadership regarding sustainability”.

Jack Azoulay, a partner at Argos, a French specialist sustainability asset manager, said rather than a backlash against ESG, he believed a backlash against greenwashing was emerging.

In Switzerland, Ethos, a foundation set up by pension funds to help them invest responsibly, is running a campaign aimed at pushing asset managers to reflect their clients’ expectations during votes at annual meetings.

In the UK, ESG and sustainability continued to be crucial considerations for local government pension schemes in particular, said Vanessa Hodge, sustainability integration lead at Mercer, an investment consultancy.

Religious investors, such as the Diocese of East Anglia, have also remained active in pushing for climate plans, and their stance is influential with smaller community funds.

While pension groups needing to take a long-term view for payouts to their retirees and those with a multi-decade horizon focus on sustainable investing, shorter-term institutional and retail investors were still shying away from ESG open-ended and exchange traded funds, the latest Morningstar figures show.

Redemptions reached a record $8.6bn globally in the first quarter of 2025 from ESG funds — with the 10th straight quarter of outflows in the US — as geopolitical and trade tensions dominated capital markets and the anti-ESG movement rose.

David Blood, senior partner at Generation Investment Management, which he set up with former US vice-president Al Gore more than two decades ago, said that as some investors backslid on sustainability, it opened up opportunities for others.

“In our private markets businesses, our most successful investments have happened during periods where some number of investors have been stepping back,” he said.

“We’ve seen this movie before. I would say this is either the third or fourth time there’s been a pushback on sustainability or ESG. And each time it’s come back much stronger and further down the road.”