SSGA and JPMorgan's Departure from Climate Action 100+: A Blow to Climate Advocacy?

By Ottavio Cao

In a recent turn of events, two of the world’s biggest asset managers, JPMorgan Asset Management and State Street Global Advisors, have decided to quit Climate Action 100+, immediately followed by BlackRock’s decision to scale back on its participation. The departure of these major players is creating concerns about the future of climate advocacy in the financial sector. Many investors are left wondering about the potential implications for global initiatives aimed at addressing climate change.

However, before discussing what could happen next, it’s important to understand what Climate Action 100+ is.

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Understanding Climate Action 100+

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Climate Action 100+ is a coalition of investors that aims to engage with the world's largest corporate greenhouse gas emitters to address climate change. Launched in 2017, this initiative boasts a membership of over 600 investors with assets totalling more than $50 trillion. Its mission is to ensure that the companies it targets take meaningful action towards the global goal of halving GHG emissions by 2030 and delivering net zero GHG emissions by 2050, in line with the goals of the Paris Agreement to pursue efforts to limit warming to 1.5°C. Last year, the group announced that it would be shifting from pressuring companies on climate disclosures (phase 1) to pushing them to actively reduce greenhouse gas emissions (phase 2).

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How will they do that? By asking Climate Action 100+ focus companies to:

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1.???? Implement a strong governance framework which clearly articulates the board’s accountability and oversight of climate change risk;

2.???? Take action to reduce greenhouse gas emissions across the value chain, including engagement with stakeholders such as policymakers and other actors to address the sectoral barriers to transition;

3.???? Provide enhanced corporate disclosure and implement transition plans to deliver on robust targets. This should be in line with the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and other relevant sector and regional guidance, to enable investors to assess the robustness of companies’ business plans and improve investment decision-making.

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The significance of Climate Action 100+ cannot be overstated. With its vast resources and collective influence, the coalition has the power to pressure corporations into adopting more sustainable practices, thereby driving systemic change across industries. Its collaborative approach emphasizes dialogue and engagement, offering companies the opportunity to voluntarily commit to ambitious climate targets.

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The Departure

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SSGA has expressed concerns over the enhanced requirements of Climate Action 100+'s phase 2 strategy, stating that they are not aligned with the firm's independent approach to proxy voting and engagement. JPMorgan Asset Management (JPMAM) has opted to withdraw, citing its significant investment in its stewardship team and corporate engagement as reasons for no longer participating in Climate Action 100+ engagements. Similarly, BlackRock cited conflicts with US laws mandating managers to act solely in clients' long-term economic interests as the reason for dropping its corporate membership. Following this, BlackRock is introducing a new stewardship option allowing clients, particularly in Europe, to prioritize decarbonization in their investment objectives.

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These departures and BlackRock's scaling back indicate a notable shift in strategy and priorities among major asset managers. The absence of full support from any of the top five global asset managers (Vanguard Group and Fidelity Investments never became members) has significantly undermined Climate Action 100+'s strategy to leverage shareholder influence in pushing polluting companies to decarbonize, as trillions of dollars under management have been pulled out by Climate Action 100+ “money clamp”, resulting in a substantial setback for the coalition of investors.

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What now?

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The departure of SSGA and JPMorgan Chase from Climate Action 100+ is undoubtedly a setback for climate advocacy efforts. These institutions wield significant influence within the financial sector and have the potential to drive meaningful change through their investment decisions. Their absence from the coalition diminishes its collective bargaining power and weakens its ability to hold corporations accountable for their environmental impact.

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Moreover, their departure sends a worrying signal to the broader investment community about the prioritization of climate considerations. As influential players, like SSGA and JPMorgan Chase, have the power to shape industry norms and standards. Their decision to distance themselves from Climate Action 100+ may push other financial institutions to prioritize short-term financial gains over long-term sustainability.

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Through these actions a wrong message has been sent to the investment community: financial returns are misaligned with sustainable investments. This couldn’t be more wrong, as it is possible to

obtain high returns and have a meaningful sustainable impact too. Take for example Unilever, JetBlue or many other companies that by focusing on sustainable investments have not only flourished but also moved towards the goal of a more sustainable economy. Unfortunately, these events can only be considered a step back, which will definitely cost us in the future and not only in financial terms.