Bloomberg ) — It was greenery OR washing the greenery?
That's the question the ESG world is asking behind JPMorgan Asset Management and State Street Global Advisors OFF TO of the world the largest group of investors designed to combat climate change.
One interpretation of their withdrawal from Climate Action 100+ on Thursday, the coalition of investors that pressures big polluters like Exxon Mobil Corp. and Shell Plc to decarbonize, is that fierce Republican attacks on US environmental, social and governance investment strategies are prompting high-profile firms to try to downplay or mask their sustainability efforts. And it's certainly true that finance sector climate groups have been prime targets for ESG backlash.
The other way to look at it is that some large investors sign up to initiatives like CA100+ only when there is a clear marketing benefit to doing so. Just a few years ago being a signatory to a group like CA100+ was seen as a badge of honor that was heavily promoted in press releases and company reports. Today, membership has become an obligation and those who never really committed to the cause are the first to leave.
Mark Campanale, founder and director of Carbon Tracker, an energy transition research firm, is ready to give asset managers the benefit of the doubt. He said the anti-ESG lobby has “put the fear of God” into investors and this will become more extreme if Donald Trump wins the US presidential election later this year. In this scenario, sustainability is going underground.
“Institutions will continue to embrace sustainability because it is a real risk, but they will do so without showing off or being paraded,” Campanale said. “It's easier to go underground than to show big initiatives that attract the wrong attention. What we're seeing now is fading.”
Others are less generous. Rebecca Self, a former senior green finance banker at HSBC Holdings Plc who now runs a sustainability consulting firm, said the departures lead her to question “whether there was ever a real commitment from these organizations to the goals general alliances in the first place.”
Ben Cushing, director of the Sierra Club's fossil-free finance campaign, is even more strident. “Asset managers subject to disingenuous political attacks by climate deniers are signaling that they will abandon their fiduciary duty to mitigate climate risk for the sake of short-term gain,” he said.
State Street Global Advisors, which manages $4.1 trillion, said on Thursday that a revamp of the CA100+ in which underwriters are expected to take a more hands-on approach by requiring companies to “move from words to action” was inconsistent with the stance of its for proxy voting and company commitment. JPMorgan Asset Management, which oversees $3.1 trillion, did not mention CA100+'s new strategy, saying it left the group because it has made significant investments to develop its climate risk engagement framework.
BlackRock Inc is also changing its relationship with the CA100+, and its statement on Thursday, like those from other firms, divided opinion.
The world's largest money manager said it will move its CA100+ membership to BlackRock International, meaning the New York-based parent will no longer be affiliated with the CA100+. The firm said most of its clients who want investment solutions to help them meet climate, energy transition and decarbonisation commitments are based outside the US, while the new strategy from CA100+ “would raise legal considerations, particularly in the USA”.
For Adam Matthews, chief investment officer for the Church of England Pensions Board, the move is a “pragmatic thing” that allows BlackRock to maintain its reputation among clients for whom climate is a big issue, removing a of heat in the US, where the firm and CEO Larry Fink have been a focal point of the GOP campaign.
“BlackRock, while changing its affiliation, has recognized that a significant portion of its client base wants the firm to be involved,” Matthews said. The move is “a recognition of the ultimate destination that most assets will go to over time,” he said.
Eli Kasargod-Staub, the executive director of Majority Action, a Washington nonprofit focused on responsible investing, disagreed. He called BlackRock's move “abhorrent risk mismanagement” that shows it sees climate action as “optional window dressing.”
Whoever is right about the reasons for firms leaving the CA100+ or ​​readjusting membership, this week's departures raise larger questions, particularly about the real influence of investors on polluting companies.
Harald Walkate, former head of ESG investing at Natixis Investment Managers who is now a partner at sustainable investment adviser Route17, said the departures likely reflect a growing view among investors that engagement, the core strategy of the CA100+, is a tool that rarely produces the desired results. .
The initiative appears to be based on the premise that investors can force companies to decarbonize and “that this will lead us to a net zero economy,” Walkate said. “But of course, addressing climate change will require a much more fundamental transformation of most industrial sectors,” he said.
The incentives of big finance may not match the world's climate goals. What comes next may be regulation, according to Lucy Pinsonexecutive director at non-profit Reclaim Finance.
“All this at least removes any uncertainty about the ability of financial players to support the transformation of the economy in a context of ecological emergency,” said Pinson. “Without regulation, catastrophic financial risks to the global economy and intolerable impacts for millions of people on the front lines of climate change can be expected.”
To contact the author of this story:
Alastair Marsh in London at (email protected)