Aviva Investors has reportedly abandoned its landmark 2021 commitment to divest from companies failing to meet climate targets, becoming the latest investment manager to soften its environmental stance.

The London-based investment house, which manages £238 billion in assets, had previously placed 30 major utilities, mining and oil and gas companies on a "watch list" with a promise of "full divestment" from those failing to align with 1.5C warming targets within three years.

Four years later, the division of insurance giant Aviva has revamped its approach, telling the Financial Times it now focuses on a "broader set of critical sectors" including aviation, transportation, building materials and industrials.

The company cited substantial market evolution since 2021, pointing to a "very different macro backdrop" where "concerns over energy security and economic recovery have come to the fore," affecting regulatory environments and national decarbonisation plans.

While not disclosing whether it had fully divested from any watch list companies, Aviva Investors said it had "reallocated capital" in instances where it was dissatisfied with a company's progress towards energy transition.

The company cited substantial market evolution since 2021, pointing to a "very different macro backdrop" where "concerns over energy security and economic recovery have come to the fore," affecting regulatory environments and national decarbonisation plans.

This shift comes amid broader changes in the investment landscape. At the turn of the decade, asset managers were vocal about climate change risks to investment portfolios, with Larry Fink, chief executive officer of BlackRock, declaring in 2020 that "climate risk is investment risk."

However, recent years have seen many asset managers withdraw from climate action groups, reduce support for green resolutions at annual meetings, and cut staffing in environmental functions. Russia's war on Ukraine has also driven up share prices of carbon-intensive companies, while political opposition to environmental, social and governance investment criteria has intensified largely due to pressure from Republicans in the US who, according to the New York Times, received $75 million from oil and gas interests over the course of the 2024 election cycle.

Despite the policy change, Aviva Investors maintains that its convictions regarding climate science and the potential impacts of global warming on investment performance remain "unequivocal."

The company has stated that where progress towards energy transition is unsatisfactory, it has "reallocated capital" towards companies better supporting the green transition.

In comments to FStech following the initial publication of this story, a spokesperson for Aviva Investors said: "Our convictions regarding climate science and its potential to have long-term, material impacts on investment performance are unequivocal. As such, we will continue to manage our clients’ investments on the basis of those beliefs and firmly in keeping with their expectations.

"Since defining our Climate Engagement Escalation Programme in 2021, our climate stewardship strategy has broadened to the demand side of the energy equation, including critical sectors such as aviation, transportation building materials and industrials.

"During this process, particular attention was devoted to identifying the bottom quartile of companies covered by the Programme. Given our investment approach, and in line with our clients’ expectations, in many cases we did not have any exposure to these organisations. There were however instances where we did hold these companies. In those cases, and where we weren’t satisfied with progress being made, we took the decision to reallocate capital towards companies that we believe better-support, and are leading on, the transition.

"Climate risk and its long-term implications for investment returns will continue to play a meaningful role in our investment considerations."

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