To improve their environmental image, many large financial companies have committed in recent years to putting their financial power at the service of the fight against climate change.
Today, Wall Street has done an about-face.
Financial giants like JPMorgan, State Street and Pimco have just withdrawn from Climate Action 100+, an international coalition of money managers that encouraged big companies to tackle climate issues.
“Capitalism woke »
Wall Street’s slow, steady retreat from its green commitment has been going on for months, spurred by fierce critics from the Republican Party, who accuse investment firms of engaging in “capitalism.” woke “.
In recent weeks, everything has accelerated: BlackRock, the largest asset manager in the world, has reduced its participation in the group. Bank of America has decided that it will not stop financing new coal mines, coal-fired power plants and oil drilling in the Arctic. Republicans, sensing momentum, are calling on other businesses to do the same.
This turnaround shows the difficulty for the business world to invest greener, as promised. Many companies have committed to tackling climate change, but the devil is in the details.
It’s always been superficial. If their signature at the bottom of a piece of paper put these companies in trouble, no wonder they showed up.
Shivaram Rajgopal, professor at Columbia Business School
U.S. asset managers have a fiduciary duty to act in the best interests of their clients. However, a new strategy from Climate Action 100+ could expose them to prosecution.
Since its creation in 2017, the group has encouraged listed companies to disclose more information about their emissions and determine their climate-related business risks.
A more militant phase 2
But last year, Climate Action 100+ announced phase 2 of its strategy, encouraging companies to reduce their emissions. This phase 2 calls for asset managers to pressure companies like Exxon Mobil and Walmart to adopt policies that might involve, for example, using less fossil fuels.
Some customers might disagree and sue them, and there are other concerns. Thus, acting in concert to influence the conduct of other companies could violate antitrust laws.
“In our view, making this new commitment for all of our assets under management would raise legal questions, particularly in the United States,” a BlackRock spokesperson wrote.
He adds, however, that a subsidiary, BlackRock International, remains in Climate Action 100+, which tacitly shows the difference with the regulatory environment in Europe. BlackRock also says it will offer clients the choice of whether they want to pressure companies to reduce their emissions.
Same story with State Street regarding the potential for prosecution. According to a spokesperson, State Street has determined that Phase 2 “does not align with our independent approach to proxy voting” and engagement with the companies in which it invests.
JPMorgan announced that it was withdrawing from the group, citing that it had in recent years developed its own framework for action on climate risk.
On Friday, the day after JPMorgan, BlackRock and State Street withdrew, Pimco, another large asset manager, followed suit. “We have concluded that our participation in Climate Action 100+ is no longer aligned with Pimco’s approach to sustainability,” a Pimco spokesperson wrote.
A spokesperson for Goldman Sachs Asset Management, another member, declined comment Saturday when asked whether it plans to stay with the group.
A victory, say the Republicans
The breakup of Climate Action 100+ is a victory for Republican elected official Jim Jordan, who has attacked companies with ESG (environmental, social and governance) objectives.
Many American companies have adopted ESG principles and taken a stand on climate issues. CEOs have warned of the dangers of climate change. Banks and asset managers have formed alliances to gradually withdraw from fossil energy. Billions have been allocated to sustainable investment.
This sparked an outcry, with Republicans accusing these banks and managers of supporting left-wing policies by engaging in this debate.
Texas and West Virginia have cut all ties with banks that no longer lend to the fossil fuel sector. In late 2022, Mr. Jordan opened an antitrust investigation into Climat Action 100+, calling it a “climate-obsessed cartel.”
On Thursday, he said on X that the news represented “a great victory for freedom and the American economy; Let’s hope that other financial institutions will also abandon their collusive ESG policies.”
A strategic withdrawal
Several companies that have left Climate Action 100+ say they remain committed to this issue. JPMorgan highlights that it has a team of 40 employees working on sustainable investing.
Climate change continues to present significant economic risks and opportunities for our clients.
Extract from a press release from the investment bank JPMorgan
According to Aron Cramer, CEO of BSR, a sustainability consulting firm, Wall Street is responding to political pressure without completely abandoning its climate commitments.
“The political cost and legal risk have increased,” he explains. That said, these companies are not bullshitting. They continue to take the climate into account. It doesn’t go away. They adapt to the current environment. »
This article was published in the New York Times.
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