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JPMorgan, State Street quit climate group, BlackRock steps back

JPMorgan, State Street quit climate group, BlackRock steps back

 

  • Biggest firms to leave CA100+ group since its launch
  • CA100+ looking to toughen stance on corporate laggards
  • State Street cites move as a threat to its independence

 

On Thursday, both JPMorgan Chase and State Street's investment arms announced their departure from a global investor coalition aimed at urging companies to curb climate-damaging emissions. Simultaneously, BlackRock revealed that it had transferred its membership to its international division, reducing its involvement. These decisions collectively withdraw nearly $14 trillion in assets from initiatives coordinating Wall Street's response to climate change. The exodus followed the coalition, known as Climate Action 100+ (CA100+), urging signatories to take firmer action against companies lagging in environmental responsibility.

Financial institutions have faced mounting pressure, particularly from Republican politicians, regarding their participation in such initiatives. Allegations surfaced suggesting that commitment to collective action might breach antitrust laws or fiduciary duties. However, none of the firms cited political considerations as their motivation. State Street Global Advisors (SSGA), managing $4.1 trillion, emphasized that CA100+'s revised priorities jeopardized its ability to maintain independent action.

The new priorities, adopted in June, urged CA100+ signatories to engage with policymakers and disclose discussions with companies to achieve net-zero emissions by 2050. State Street highlighted that these changes conflicted with its approach to proxy voting and engagement with portfolio companies.

JPMorgan's fund arm cited the development of its in-house investment stewardship capabilities as the reason for not renewing its CA100+ membership. Similarly, BlackRock clarified its shift in membership to BlackRock International, reiterating its commitment to acting independently on behalf of clients.

This shift by BlackRock effectively removes $6.6 trillion from CA100+, constituting two-thirds of its assets. Despite losing major asset managers, CA100+ remains steadfast in its efforts, as expressed by Kirsten Spalding, vice president of the Ceres Investor Network overseeing its North American endeavors.

Before these departures, 13 firms had previously exited CA100+, although its overall membership has expanded to include more than 700 firms, with 60 joining recently. Notably absent from the coalition is Vanguard, the world's second-largest asset manager, which opted not to join.

The departures reflect a broader trend of companies becoming less vocal about environmental, social, and governance (ESG) issues, while still recognizing the benefits of energy transition and diverse workforces. This development prompts a reflection within groups like CA100+ about maintaining their vocal advocacy or aligning more with market dynamics.

While it's unclear whether these decisions were influenced by political pressure, concerns about independence have been raised, particularly after Republican attorneys general questioned large U.S. asset managers' memberships in similar industry groups.

Environmental groups, including the Sierra Club, criticized the withdrawals, labeling them as capitulation to attacks. New York City Comptroller Brad Lander emphasized the financial risk associated with ignoring climate concerns, stating that the firms' actions neglect their fiduciary duties and jeopardize client assets.

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Published: 16-02-2024

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