(Bloomberg) — Harris Associates, a multibillion-dollar asset manager that has touted responsible investing, agreed to enact a series of investor-driven measures after it was disclosed that one of its top managers helped fund groups that question the consensus on climate change.
Brunel Pension Partnership, one of Britain’s largest retirement pools, said it looked into Harris’s investment practices following a Feb. 14 report by Bloomberg regarding Deputy Chairman David Herro, one of Harris’s two chief investment officers. Herro–in his personal capacity–directed hundreds of thousands of dollars to three think-tanks in the U.K. and U.S., either as a fundraiser or through his own donations, according to U.S. tax filings.
Brunel, which is pushing financial firms to address climate change, said that while it concluded Herro’s activities didn’t affect how Harris invested, it asked the asset manager to adopt a suite of new measures. They include hiring a “responsible investment professional” who reports directly to senior management, creating a climate change policy and appointing a shareholder advisory firm to identify climate risks. Anne O’Reilly, a spokeswoman for Harris, which managed $120 billion at the end of last year, said the plan has “been approved by the board and will be enacted over the course of the year.”
In the past, Herro has publicly questioned the underpinnings of global warming. He has also said his personal philanthropy has nothing to do with his firm. Brunel focused on Herro’s role with the Global Warming Policy Foundation, the main U.K. think tank lobbying against greenhouse gas regulations. Herro served as treasurer of its U.S. fundraising arm and helped raise about $590,000 for the organization over a three-year period, tax filings show.
“We will hold Harris to account for the delivery of these changes in our monitoring and ongoing management, as we do for all our investment managers, and will continue to challenge them rigorously on their analysis and assessment of climate change-related risks within their investment practices and processes,” said Brunel, which manages about 30 billion pounds ($37 billion) for local U.K. governments.
Harris also agreed to join the Transition Pathway Initiative, a global program backed by asset managers that assesses company preparedness for the transition to a low carbon economy. Additionally, the Chicago-based asset manager will appoint Institutional Shareholder Services to perform scenario analysis and help with reporting on carbon footprints, and build a new webpage dedicated to responsible investment.
Read More: Climate Skeptic Asset Managers Face Pressure to Reveal DonationsHerro, 59, made his name in the value-investing discipline pioneered by Warren Buffett. A self-described libertarian, in 2018 he donated a combined $150,000 to two conservative U.S. groups that lobby against climate laws tied to the energy industry, the Competitive Enterprise Institute and the Heartland Institute, tax filings show.
When asked in February whether he still supported or helped fund climate skeptic groups like GWPF, Herro responded that “given the importance of ESG, one must listen to all sides of any argument.”
In 2015, Herro told the Financial Times that man-made global warming remains unproven, and that corporate executives who promise to tackle it are “appeasing environmental extremism and zealotry” and putting “pop science” ahead of shareholder value.
Brunel hired Harris in December along with four other money managers to run its “Global High Alpha portfolio,” which had 2.6 billion pounds at its start. While Harris and Herro declined to comment on his financial support for groups opposed to climate regulation, another Harris investor, U.K. pension pool LGPS Central Ltd., said in an emailed statement that Herro “fully accepts the damaging impact of climate change” and had “ceased all involvement with the GWPF before any press coverage on the subject.”
Herro didn’t respond to requests for comment on LGPS’s statement. GWPF co-founder Benny Peiser also didn’t return requests seeking comment.
Harris is one of three money managers LGPS hired to manage its 2 billion pound “Active Global Equity Sub Fund.” LGPS oversees about 45 billion pounds, and like Brunel, manages local government pension plans.
“Such behavior by fund manager executives would be an issue of deep concern.”
Two years ago, Harris formulated a responsible investment policy, and then last year signed up to the Principles for Responsible Investment, a United Nations-backed initiative that promotes ESG investment by the asset management industry.
The PRI is considering requiring firms that sign up to its principles to disclose information about their executives’ donations to groups that seek to influence government policy, a person with knowledge of PRI’s work said in February. A decision may be made later this year.
Retirement funds including Japan’s Government Pension Investment Fund, the world’s largest, and California State Teachers’ Retirement System are increasingly scrutinizing where their money is going as the climate crisis worsens. Brunel said in January that it would fire money managers who fail to curb their exposure to climate change or invest in a low-carbon economy.
In February, Faith Ward, chief responsible investment officer for Brunel, was asked whether it’s a conflict for asset managers who oversee ESG strategies to personally support or donate to climate skeptic groups.
“Such behavior by fund manager executives would be an issue of deep concern,” Ward said at the time. “Shared ambition on climate change is a core element of our manager selection criteria.”
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