Investors worth US$14tn leave CA100+ climate group

JP Morgan and State Street have left the Climate Action 100+ coalition and BlackRock has downgraded its affiliation with the group, effectively removing US$14 trillion worth of influence from the investor-led climate initiative.

The move comes just a few days after CA100+ released a net zero standard for oil and gas companies, signalling its intention to start pressuring the sector to decarbonise. (The banking arm of JP Morgan is the world’s top fossil fuel financier, having funnelled more than US$430 billion into the sector between 2016 and 2022.)

A few months ago, the coalition also deplored insufficient progress on corporate climate targets and asked investors to step up engagement with their portfolio companies to push them towards more decisive action. State Street and BlackRock cited these new expectations as either inconsistent with their independent approach to proxy voting or “in conflict with US laws”.

This is another reflection of growing political division over environmental, social and governance (ESG) investment in the United States. Between January and June 2023, at least 165 bills and resolutions against ESG investment criteria were introduced in 37 states – 22 of which were approved by state governments. 

Tensions around corporate climate action seem to be escalating: ExxonMobil is refusing to drop its lawsuit against activist shareholders that wanted the oil major to adopt Scope 3 emissions targets, even after they withdrew their proposal; business groups are suing the California Air Resources Board over new climate reporting requirements, and the Securities and Exchange Commission is facing growing opposition over its proposed climate disclosure rule.

CA100+ exit: ‘Are we surprised?’

JP Morgan, State Street and Blackrock’s decision to step back from their involvement in CA100+ has been widely criticised by those promoting an ambitious climate agenda, as well as sustainable investment professionals. 

New York City Comptroller Brad Lander said the investors are “caving into the demands of right-wing politicians funded by the fossil fuel industry” and “failing in their fiduciary duty and putting trillions of dollars of their clients’ assets at risk”. 

Sasja Beslik, Chief Investment Strategy Officer at SDG Impact Japan, asked his Linkedin followers: “Are we surprised?” seeing the decision as “a reminder that values don't always align, and banks always choose to prioritise their interests over their commitments to sustainability”.

“I feel sorry for those big global financial institutions for breaking under political pressure (from Republicans, who do not care about or do not understand climate risks). The legal risks of ignoring climate risks and taking insufficient action are increasing fast – this could cost the mentioned financial firms dearly,” warned Christoph Klein, Founder and Managing Partner of German-based sustainable asset manager ESG Portfolio Management.

Misaligned associations

Earlier this week, think tank Planet Tracker urged companies to scrutinise their affiliations with business associations to ensure alignment with their stated climate goals, warning that misaligned memberships put corporates at risk of being accused of greenwashing.

The organisation invited companies to review the climate policies and actions of business groups like the US Chamber of Commerce or the National Association of Manufacturers, which regularly “campaign against climate leadership”, try to influence a change of policy and leave them if these measures are ineffective.

While JP Morgan, State Street and BlackRock’s exit from Climate Action 100+ is probably not the type of reconsideration Planet Tracker talked about in its report, the think tank's Research Analyst Ion Visinovschi doesn't appear too worried.

"While recently renowned investors withdrew from the CA100+, 60 members have joined since the phase 2 changes were announced in June 2023, bringing its total membership to more than 700. So it would appear that the initiative keeps growing," he tells CSO Futures.

"We believe the real issue is whether investors are serious about climate transition plans and understand the important financial implications of it. We would love to see the end of 'greencrowding' [a word Planet Tracker defines uses to characterise climate groups with many members that tend to move at the speed of the slowest]. If financial institutions sign up to pledges and organisations, they should follow through (as long as these organisations uphold the achievement of their sustainability goals)," Visinovschi adds.