Financial giants JPMorgan Chase and State Street pull assets from ESG group

Two of the world’s largest financial institutions cut ties Thursday with Climate Action 100+, delivering the latest setback to the world’s biggest coalition of investors pressuring corporations to ditch fossil fuel assets.

The asset management arms of JPMorgan Chase and State Street dropped out of Climate Action 100+, home to more than 700 investment firms totaling $68 trillion in assets under management.

BlackRock, the world’s largest asset manager, with more than $10 trillion in assets, distanced its U.S.-based operations from Climate Action 100+ by transferring its membership to BlackRock International.

The coalition, founded in 2017, revealed plans last year to hold members more accountable by encouraging them to disclose more details about their investment decisions. Some high-profile members raised legal concerns about maintaining their fiduciary duties.

State Street said the changes jeopardized the company’s independence. Climate Action 100+ officials say they need the disclosure standards to chart a better course for corporations to reach net-zero emission portfolios by 2050.

“After careful review, State Street Global Advisors has concluded the enhanced Climate Action 100+ Phase 2 requirements for signatories will not be consistent with our independent approach to proxy voting and portfolio company engagement,” State Street spokesman Randall Jensen said. “As a result, we have decided to withdraw from Climate Action 100+.”

JPMorgan suggested that its in-house guidelines for environmental, social and corporate governance, or ESG, investing already exceeded the Climate Action 100+ goals.

“The firm has built a team of 40 dedicated sustainable investing professionals, including investment stewardship specialists who also leverage one of the largest buy-side research teams in the industry,” the company said.

BlackRock’s shift to its international arm meant its domestic assets would no longer support Climate Action 100+’s climate initiatives.

“As BlackRock made clear when signing up as a member of CA100+ in 2020, at all times the firm maintains independence acting on behalf of clients, including in choosing which issuers to engage with, and how to vote proxies,” the company said.

A spokesperson for Climate Action 100+ declined to comment on the companies’ actions. Last year, the group defended its policy changes as a “natural and logical evolution” to encourage members to meet emissions reduction goals.

Elected Republicans have increased pressure on financial institutions to distance themselves from the ESG approach, which conservatives assail as “woke capitalism.”

House Judiciary Committee Chairman Jim Jordan, Ohio Republican, said the State Street and JPMorgan decisions are “big wins for freedom and the American economy” and urged other financial institutions to abandon “collusive ESG actions.”

He and other Republicans, especially those from energy-rich states, have accused some finance firms and investment banks of violating antitrust laws by coordinating with climate investor groups to cut assets with high carbon footprints, such as fossil fuels, from their portfolios.

“These firms have taken an important step in leaving Climate Action 100+ but still have a lot of work to do to regain people’s trust as a fiduciary focused on financial return,” said Derek Kreifels, CEO of the State Financial Officers Foundation.

JPMorgan, State Street and BlackRock remain members of United Nations-backed ESG groups. The Glasgow Financial Alliance for Net Zero, the Net-Zero Banking Alliance and the Net Zero Asset Managers initiative push the global financial sector to promote green energy.

“Their continued membership in other groups, like the Net-Zero Banking Alliance and Net Zero Asset Managers initiative, calls into question whether today’s announcement reflects a real shift,” Mr. Kreifels said.

Last year, several multinational insurance companies left the Net-Zero Insurance Alliance and mutual fund giant Vanguard quit the Net Zero Asset Managers Initiative.

At least 13 other firms have left Climate Action 100+ in recent years, but a spokesperson told the Reuters news agency that some 60 firms joined this fall.