Article content

(Bloomberg) — The world’s largest investor group formed to fight climate change suffered a blow when two of the industry’s biggest money managers left the coalition.

JPMorgan Asset Management and State Street Global Advisors both said Thursday they’re withdrawing from Climate Action 100+. The investor group, which boasts more than 700 investor signatories, was set up to push the likes of BP Plc, Exxon Mobil Corp. and Glencore Plc to decarbonize their operations.

Article content

Article content

BlackRock Inc. said in a statement that its relationship with CA100+ is changing after the climate group updated its strategy. The world’s largest money manager said it will transfer its membership to BlackRock International, a unit of the firm whose clients are focused on decarbonization. The parent company will no longer be affiliated with CA100+.

The departures are occurring during a period of heightened US political backlash against environmental, social and governance investing. The pushback has been gaining momentum since 2021 when Texas was among the first states to pass laws that restrict government contracts with businesses that take what they regard as punitive stances toward the fossil-fuel industry.

More recently, GOP officials across the country have launched investigations into banks and asset managers, introduced anti-ESG laws and pulled funds from Wall Street firms such as BlackRock, which was a champion of ESG investing.

House Judiciary Chairman Jim Jordan, an Ohio Republican, called the decisions by JPMorgan and State Street “big wins” and “we hope more financial institutions follow suit in abandoning collusive ESG actions.”

Article content

Article content

“I wouldn’t be surprised if we see more defections, especially given that there’s now a cost, such as potential litigation, that wasn’t there when companies joined,” said Lance Dial, a Boston-based partner at law firm K&L Gates LLP. “Attorneys general have subpoenaed firms about their membership of these groups.”

A spokesman for CA100+ said its members are “committed to managing climate risk and preserving shareholder value through their participation in the initiative.” He declined to comment specifically on JPMorgan Asset Management beyond confirming the money manager has left the initiative. He wasn’t immediately available to discuss the decision by State Street Global Advisors. 

After an initial period that focused on improving governance, curbing emissions and strengthening climate-related financial disclosures, CA100+ recently entered a second phase in which signatories are expected to take a more active approach by requesting that companies “move from words to action.” The change came at an awkward time for some given the US Republicans’ scrutiny of finance firms’ climate commitments and potential collusion.

Article content

State Street Global Advisors said in a statement that its $4.1 trillion asset-management arm considers the latest requirements from CA100+ to be inconsistent with “our independent approach to proxy voting and portfolio company engagement.” JPMorgan didn’t mention the new strategy of CA100+, saying it left the group because it has made significant investments in developing its own climate risk engagement framework. 

For many investment firms, climate change has left them in something of a bind. On the one hand, most acknowledge in their financial reports that they view climate change as a material financial risk to their operations and portfolios, but with ESG becoming a political punching bag, they’re taking an ever more cautious view on what actions they will take on climate, especially if that’s in a group with other investors.

This has led to investment managers and banks talking less publicly about ESG-related issues, a phenomenon which has been dubbed “greenhushing.” And the reality is the decisions to leave CA100+ will likely have little impact on the industry’s financing of green projects and other efforts to address climate change.

Article content

BlackRock has said it manages more than $800 billion via its sustainable investing platform. Additionally, banks helped arrange a record $150 billion of green, social, sustainability and sustainability-linked bonds globally last month and they remain committed to investing in the energy transition.

By responding to the changing political zeitgeist, investors are likely missing the bigger picture of a future in which climate change is an ever more central regulatory and financial concern, according to Michael Sheren, a former senior adviser at the Bank of England who’s now a fellow at the Cambridge Institute for Sustainability Leadership.

“The political winds aren’t rewarding climate-active firms today,” Sheren said. Withdrawing from CA100+ “sends the wrong, short-sighted signal and gives cover for others to do the same,” he said.

Since CA100+ was founded in 2017, carbon emissions have continued to rise. Large emitters mostly lost their appetite to cut emissions when energy prices were elevated and governments focused on energy security following Russia’s invasion of Ukraine.

—With assistance from Saijel Kishan.

Article content