U.S. Divides From Europe in Shocking Climate Action 100+ Exit: What Major Asset Managers Don’t Want You to Know!

Unprecedented Departures Shake Climate Action 100+

In recent months, several American asset managers have made an unexpected exit from Climate Action 100+, a coalition focused on climate accountability. These exits align with a fierce political battle in the U.S. over sustainable investing, driven by Republican claims of a “climate cartel” undermining investor returns.

This divide is particularly stark when contrasted with Europe, where sustainable investing continues to gain traction. The U.S. political landscape, however, views ESG (Environmental, Social, and Governance) investing as “woke capitalism,” an accusation that has fueled the debate.

Despite these departures, Climate Action 100+ remains robust, with over 600 financial institutions still committed. Notably, since June 2023, 87 new financial institutions have joined, predominantly from Europe, underscoring the growing global commitment to climate action.

Kirsten Spalding, Vice President of the investor network at Ceres, emphasized that the coalition remains the largest climate risk investor collaboration globally. She noted the unwavering support from asset owners such as pension plans, churches, and universities in both the U.S. and Europe.

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Political Pressure and ESG Backlash

The recent wave of exits followed a Republican-led inquiry demanding documents from U.S. companies about their ESG goals and involvement in Climate Action 100+. This inquiry intensified after the House Judiciary Committee accused financial firms of colluding to enforce decarbonization, sparking political tensions.

While investors haven’t cited this inquiry as a direct reason for leaving, the political pressure surrounding ESG is undeniable. Major firms like JPMorgan and Goldman Sachs have remained silent on the issue, reflecting the contentious atmosphere.

Additional political efforts include letters from attorneys general in over 20 states to financial institutions, probing their ESG practices. Several states have also proposed anti-ESG bills, further complicating the landscape for sustainable investing in the U.S.

Key Points:

• Republican inquiry targets 130 U.S. companies on ESG goals
• House Judiciary Committee accuses firms of collusion
• State-level actions against ESG practices intensify

Global Perspectives on Climate Collaboration

The Republican inquiry also accuses Climate Action 100+ of violating antitrust laws by boycotting the fossil fuel industry. Although this claim is unlikely to hold under American law, it adds significant pressure on financial institutions.

In contrast, European and U.K. authorities have issued guidelines to ensure antitrust laws do not hinder climate collaboration. This proactive approach aims to balance competition laws with sustainability goals, setting a stark contrast to the U.S. scenario.

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The U.K.’s Green Agreements Guidance, for example, supports environmental collaborations without violating competition laws. Other European countries, including France and Germany, have adopted similar measures to foster sustainability without legal conflicts.

Lindsey Stewart of Morningstar Sustainalytics remarked on the differing approaches, highlighting Europe’s more supportive stance on integrating ESG into investment practices, unlike the politicized environment in the U.S.

Engagement and Voting Trends

Climate Action 100+ plays a crucial role during proxy seasons, where shareholders vote on critical issues at company meetings. Last year, the initiative highlighted 20 shareholder proposals focused on climate-related concerns.

A study by Lindsey Stewart revealed a significant divide in voting patterns between U.S. and European signatories. While European fund managers supported 85% of these proposals, their U.S. counterparts approved only half, reflecting regulatory and cultural differences.

European regulations demand stringent emissions and climate policy disclosures, fostering greater acceptance of ESG integration. This regulatory environment supports the view that sustainability is essential in investment management.

Although this is a corporate engagement initiative, everyone recognizes that the transition is just not going to happen without strong policy intervention.

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Initially focused on the world’s top 100 emitters, Climate Action 100+ now engages 170 companies, with three-quarters committing to net-zero targets by 2050. The initiative calls for more transparency, particularly in climate lobbying activities, to hold companies accountable.