Firms cite legal risks and political backlash as reasons for exit
Several leading financial firms, including JPMorgan, State Street, and Pimco, have recently withdrawn from Climate Action 100+.
According to The Globe and Mail, this move marks a significant departure from their previous stances on environmental advocacy.
Since its inception in 2017, Climate Action 100+, an international coalition focused on climate issues, has been pivotal in pushing publicly traded companies to disclose more about their emissions and acknowledge climate-related business risks.
However, the group's recent strategic shift to phase two, aiming to reduce emissions more aggressively, has prompted these Wall Street firms to reassess their involvement. The retreat appears to stem from a combination of political pressure and legal concerns.
Republicans have criticized these investment firms for engaging in “woke capitalism,” prompting a closer examination of the potential legal implications of the group's new strategy.
BlackRock, the world's largest asset manager, scaled back its involvement, citing U.S. legal considerations, but noted that its European subsidiary would remain in the coalition, highlighting regional regulatory differences.
BlackRock also introduced options allowing clients to choose if they want to pressure companies on emission reductions.
State Street expressed concerns about the legal risks and inconsistencies with their independent approach to proxy voting. JPMorgan cited the development of its own framework for engaging on climate risk as a reason for its withdrawal.
Following these firms, Pimco also exited the group, stating that its participation was no longer aligned with its approach to sustainability. Goldman Sachs Asset Management, another member, has not publicly commented on its plans regarding the group.
This fracturing of Climate Action 100+ is seen as a victory by some Republican leaders, like Rep. Jim Jordan of Ohio, who has been vocal against companies pursuing ESG goals.
The backlash against climate commitments has been growing, with some states even banning business with firms distancing themselves from fossil fuel companies.
Despite the pullout, several firms maintain their commitment to addressing climate change. JPMorgan, for example, has a team dedicated to sustainable investing and acknowledges the material economic risks and opportunities presented by climate change.
Mindy Lubber, CEO of Ceres, and a member of Climate Action 100+'s steering committee, argues that the new strategy is a continuation of the group's initial focus and is essential for addressing the risks posed by climate change.
Aron Cramer, CEO of BSR, a sustainable-business consultancy, views this retreat as a response to heightened political and legal pressures rather than a complete reversal of climate commitments. He emphasizes that these corporations continue to consider climate issues, albeit in an adapted manner to the current environment.
