Opponents of environmental, social and governance investing ideas are taking a victory lap a week after some of the world’s large asset managers, including BlackRock, JPMorgan Chase and State Street Global Advisors, ducked out of the world’s largest pro-ESG investor coalition, called Climate Action 100+.
“JPMorgan and State Street’s departure is a necessary step in the right direction, but consumers should wait to trust these companies again,” said Will Hild, executive director of Consumers’ Research, a conservative-leaning nonprofit that tracks anti-ESG efforts. He made the comments in a prepared statement.
“By leaving the Climate Action 100+ climate cartel, they are signaling that the actions of millions of consumers and dozens of elected officials are having an effect,” Hild said.
JPMorgan and State Street said last Thursday that they were withdrawing from the coalition, and BlackRock said in a press release that it was scaling back its participation. Pimco will leave March 15, a spokesman for Climate Action 100+ said.
The four firms oversee a total of $17 trillion in assets, (JPMorgan Chase oversees $2.5 trillion; while Pimco manages $2 trillion; State Street handles $3.5 trillion; and BlackRock, the largest, manages $9 trillion).
Critics of ESG investing celebrated the announcements and pointed to the campaigns mounted by investor groups, as well as state and federal entities, pushing back on anti-fossil fuel activism and policies in recent years.
But statistics on ESG fund flows also revealed disparate results regardless of the coalitions asset managers align themselves with. Earlier this month, BlackRock reported that its total ESG assets under management had soared 53% since the start of 2022, despite criticism from GOP politicians.
And some of those fund flows probably are attributable to internal market dynamics. In 2022, tech stocks favored by ESG investors performed poorly while energy shares did well. In 2023, market conditions for sectors reversed directions as technology shares led the 2023 bull market.
Morningstar reported that a total of $13 billion flowed out of ESG funds in 2023 because of “lagging performance, continued political scrutiny in the United States, and a bad year for an iShares fund.”
Lawmakers such as Jim Jordan, chairman of the House of Representatives Judiciary Committee, wasted no time celebrating the asset managers’ decisions to walk back or withdraw membership in the coalition. “Today’s decisions by JPMorgan and State Street are big wins for freedom and the American economy, and we hope more financial institutions follow suit in abandoning collusive ESG actions,” said Jordan, an avowed opponent of ESG, in a post on X.
Jordan, a Republican lawmaker from Ohio, is currently leading an investigation into whether the efforts of asset managers and advocacy groups violate antitrust and anti-collusion laws. In December he subpoenaed climate activist firm Ceres, which co-founded Climate Action 100+, and he’s subpoenaed BlackRock and State Street to determine whether the firms’ efforts to decarbonize the assets they manage or influence are a violation of U.S. antitrust laws designed to prevent collusion.
States with anti-ESG policymakers have also ramped up their legal and policy push. In March, a coalition of 18 state attorneys general wrote a letter to the 50 largest asset managers, warning of “potential unlawful coordination” and potential collusion, which they said appears throughout Climate Action 100+’s action plans and documents.
“This is a step in the right direction and significant victory in our states’ fight against the international corporate collusion targeting the coal, oil and natural gas industries,” said Riley Moore, a member of the state attorneys coalition and West Virginia’s state treasurer, in a statement.
According to Consumers’ Research, an anti-ESG action and policy tracker, 32 states are pursuing actions to derail or eliminate ESG investment policies.
When asked what the impact of departing asset managers would be on Climate Action 100+, Joe Cockerline, a spokesman for the coalition, said the organization “does not comment on individual signatories and their specific circumstances.”
But he added, “More than 700 investors are committed to managing climate risk and preserving shareholder value through their participation in the initiative. Since its inception, Climate Action 100+ has experienced remarkable growth—and that has only continued. Last autumn alone, more than 60 new signatories joined, and we expect strong interest to continue.”
Members of the coalition currently have $68 trillion in assets, the group says on its website.
The asset managers who withdrew said they did it because of conflicting or duplicative strategies or maintained that they’ve already accomplished improvements.
JPMorgan said it has made a “significant investment” in its own corporate engagement and stewardship efforts, so it didn’t need to participate in Climate Action 100+ engagements, according to the Financial Times.
State Street said in the same report that the “phase 2” priorities the coalition adopted in June, which would press companies to actually begin cutting emissions, were inconsistent with the firm’s independent approach to proxy voting and portfolio company engagement.
In the Financial Times report, BlackRock also cited concerns with Climate Action 100+’s phase 2 strategy, with the firm believes conflicts with U.S. laws requiring investment managers to act entirely in their clients’ best interests, but added that investors can set their own decarbonization limits.