By Simon Jessop and Ross Kerber
(Reuters) -JPMorgan Chase’s and State Street’s investment arms on Thursday both quit a global investor coalition pushing companies to rein in climate-damaging emissions, while BlackRock said it has transferred its membership to its international arm, limiting its involvement.
The decisions together remove nearly $14 trillion of total assets from efforts to coordinate Wall Street action on tackling climate change and came after the coalition, known as Climate Action 100+, or CA100+, asked signatories to take stronger action over laggards.
Financial firms have faced growing pressure from Republican politicians over their membership of such groups, amid accusations that committing to shared action could be a breach of antitrust law or fiduciary duty.
None of the firms cited politics among their motivations. A spokesperson for State Street Global Advisors (SSGA), which manages $4.1 trillion, said the new priorities set by CA100+ threatened its ability to act independently.
The priorities, adopted last June, call for CA100+ signatories to engage with policymakers and for some to publish details on their talks with companies towards the goal of getting them to lower emissions to zero on a net basis by 2050.
The changes, however, were “not consistent with our independent approach to proxy voting and portfolio company engagement,” said State Street spokesperson Randall Jensen.
JPMorgan’s fund arm said it had decided not to renew its membership of CA100+ after building up its own investment stewardship capabilities. The Financial Times first reported the news. The unit manages $3.1 trillion.
BlackRock said it is no longer a member of the CA100+ but rather has shifted its membership in CA100+ to BlackRock International.
“As BlackRock made clear when signing up as a member of CA100+ in 2020, at all times the firm maintains independence acting on behalf of clients, including in choosing which issuers to engage with, and how to vote proxies,” the company said in a press release. It also said it would add a new engagement and proxy voting option to give clients a way to prioritize climate goals.
BlackRock’s move effectively removes $6.6 trillion, or two-thirds of its total assets, from the pool represented by CA100+.
Kirsten Spalding, vice president of the Ceres Investor Network, which oversees the CA100+’s North American efforts, said the group had expected some signatories to leave as it adopted its new priorities, and that it would continue its efforts despite the loss of the big asset managers.
“We knew that the focus on making sure there was movement from certain companies was going to be uncomfortable for some investors,” Spalding said in an interview.
NOTABLE ABSENCE
Before Thursday, 13 firms had left CA100+ over the years, including Walter Scott & Partners and Loomis Sayles. But its overall membership has grown to more than 700 firms including 60 new ones that joined in the fall, a spokesperson said.
A notable absence is the world’s second biggest manager, Vanguard, which never joined and, in late 2022, dropped out of another well-known climate grouping, the Net Zero Asset Managers (NZAM) initiative. Vanguard also cited independence concerns, as did a number of insurers who left a sibling organization.
Richard Fields, consultant for leadership advisory firm Russell Reynolds Associates, said the departures are in line with how many companies have grown less vocal about environmental, social and governance (ESG) issues even as they continue to see benefits in an energy transition and diverse workforces.
The development puts groups like CA100+ “at a crossroads,” he said. “Do they want to keep being more vocal and aggressive? Or do they follow the markets and be a little less aggressive?”
While it is hard to say whether the firms caved to political pressure, Fields said, “There’s definitely some overlap in concepts between what the Republican establishment has brought up, and these decisions.”
SHOULD OTHERS FOLLOW?
Fields cited how last March a group of Republican attorneys general co-led by Montana’s Austin Knudsen questioned most of the largest U.S. asset managers about their membership in the industry groups and described what it called “potential unlawful coordination” within CA100+.
In a statement on Thursday sent by a representative, Knudsen called the moves by the three companies “great news” and said, “We need every asset management firm to follow suit.”
Several environmental groups criticized the moves including the Sierra Club, which in a statement described the actions as “Major Asset Managers Cave” to the attacks.
New York City Comptroller Brad Lander, who oversees public retirement assets, said his office will take account of the firms’ moves in allocating its investments.
“Climate risk is financial risk. Today BlackRock, JPMorgan, and State Street are choosing to ignore both,” Lander said in a statement. The firms, he said, “are failing in their fiduciary duty and putting trillions of dollars of their clients’ assets at risk.”
(Reporting by Simon Jessop in London and Ross Kerber in Boston; Editing by Chizu Nomiyama, David Evans, Matthew Lewis and Daniel Wallis)