[ad_1]
Many of the world’s largest financial companies have spent the past several years polishing their environmental image by promising to use their financial muscle to fight climate change.
Now, Wall Street has flopped.
In recent days, financial giants including JPMorgan, State Street and Pimco pulled themselves out of a group called Climate Action 100+, an international coalition of money managers that aims to push big companies to address climate issues. Had been.
Wall Street’s retreat from earlier environmental pledges has been going on at a slow, steady pace for months, especially as Republicans began to mount political attacks, saying investment firms were engaging in “woke capitalism.”
But things have accelerated significantly in the last few weeks. BlackRock, the world’s largest asset manager, reduced its stake in the group. Bank of America reneged on a commitment to stop financing new coal mines, coal-burning power plants and Arctic drilling projects. And Republican politicians, sensing momentum, called on other companies to do the same.
The reasons behind the surge in activity reveal how difficult it is proving for businesses to deliver on their promises to become more environmentally responsible. While many companies say they are committed to tackling climate change, the devil is in the details.
“It was always cosmetic,” said Shivaram Rajagopal, a professor at Columbia Business School. “If signing a piece of paper was getting in trouble for these companies, it’s no wonder they’re getting the hell out.”
US asset managers have a fiduciary duty to act in the best interests of their clients, and financial firms were concerned that a new strategy from the Climate Action 100+ could put them at legal risks.
Since its founding in 2017, the group has focused on publicly traded companies increasing how much information they share about their emissions and identifying climate-related risks to their businesses.
But last year, Climate Action 100+ said it would turn its attention to motivating companies to reduce emissions, what it calls phase two of its strategy. The new plan calls for asset-management firms to begin pressuring companies like Exxon Mobil and Walmart to adopt policies that could include, for example, using less fossil fuels.
Besides the risk that some customers might reject it and potentially sue, there were other concerns. Among them: Working together to shape the behavior of other companies could violate antitrust rules.
“In our judgment, making this new commitment across our assets under management would raise legal considerations, particularly in the US,” a BlackRock spokesperson said in a statement.
BlackRock also said that one of its subsidiaries, BlackRock International, would continue to participate in the group – a tacit acknowledgment of the different regulatory environment in Europe. BlackRock also said it was introducing new features that would let customers choose whether they want to pressure companies to reduce emissions.
A State Street spokesperson said the company also looked at potential legal risks, and that the company determined the new approach “would not be consistent with our independent approach to proxy voting” and with the companies it invests in. To join.
JPMorgan said it was exiting the group in view of the fact that, over the past few years, the firm had developed its own framework to deal with climate risk.
On Friday, the day after JPMorgan, BlackRock and State Street withdrew, Pimco, another big asset manager, also followed suit. “We have concluded that our Climate Action 100+ participation no longer aligns with PIMCO’s vision of sustainability,” a firm spokesperson said in a statement.
Another member, a spokesman for Goldman Sachs Asset Management, declined to comment Saturday when asked whether he planned to remain in the group.
The breakdown of the Climate Action 100+ was a victory for Republican Representative Jim Jordan of Ohio, who has led a campaign against companies pursuing shorthand for ESG goals, environmental, social and governance factors.
Adopting ESG principles and speaking out on climate issues has become common in corporate America in recent years. Chief executives warned about the dangers of climate change. Banks and asset managers form coalition to phase out fossil fuels. Trillions of dollars allocated for sustainable investment.
At the same time, the backlash escalated, with Republicans claiming that banks and asset managers were supporting progressive politics with their climate commitments.
Some states, including Texas and West Virginia, banned banks from doing business with the state if the companies were divesting themselves from fossil fuel companies. And in late 2022, Mr. Jordan launched an antitrust investigation into the group, calling it a “climate-obsessed corporate ‘cartel’.”
on thursday he Said in a post on The news “represents a huge win for liberty and the U.S. economy, and we hope more financial institutions will follow suit in abandoning collusive ESG practices.”
Mindy Labber, chief executive of Ceres and member of the steering committee of Climate Action 100+, refuted the notion that the new strategy represents a shift away from a focus on enhanced disclosure.
“Phase two is not that different,” she said. “It’s basically investors working with companies and saying: ‘Okay, you’ve disclosed the risk. We just want to know how you’re going to address it.’ Because that’s what investors want. How are you dealing with the risk?”
Ms Labber said she was disappointed that large asset managers had pulled out of the Climate Action 100+, but she hoped they would help reduce the risks posed by heat waves, floods, fires and storms. Efforts will continue, which have been made worse by humans. -Global warming occurred. “You can’t create a new theory that climate risk is no longer a material financial risk, He said.
Many of the companies that withdrew from the Climate Action 100+ said they remained committed to the issue. JPMorgan said it has a team of 40 people working on sustainable investing and believes “climate change presents material economic risks and opportunities for our clients.”
Aaron Cramer, chief executive of sustainable-business consultancy BSR, said Wall Street firms are responding to political pressure, but not completely abandoning their climate commitments.
“The political cost has increased, the legal risk has increased,” he said. “That said, these corporations are not making U-turns,” he said. “They continue to consider climate. He is not going away. It is adapting to the current environment.”