BlackRock and State Street Global Advisors exit climate transition group

The chief financial officer who oversees New York City’s five public pension funds, with $242 billion in assets, has something to say to BlackRock CEO Larry Fink’s asset management firm and Jamie Dimon’s JP Morgan Asset Management: Guys , you are failing.

“By giving in to the demands of right-wing politicians funded by the fossil fuel industry and retreating from their commitment to Climate Action 100+, these massive financial institutions are failing in their fiduciary duty and putting trillions of dollars of their customers’ assets at risk,” New York City Comptroller Brad Lander said in a statement. “Climate risk is a financial risk. Today BlackRock, JPMorgan and State Street choose to ignore them both.”

JP Morgan Asset Management and State Street Global Advisors have withdrawn from the Climate Action 100+, a spokesperson for the group confirmed Fortune. Climate Action is a global initiative of 700 investors with more than $60 trillion in assets that engages public companies on net-zero emissions strategies and timelines. BlackRock withdrew from the firm as a corporate member and transferred its stake to BlackRock International a few weeks ago, the asset management firm said in a statement.

Climate Action was founded in 2017 and focuses on 170 companies that are among the largest emitters of greenhouse gases. The coalition, announcing the second phase of its strategy in June 2023, said it wants to see more targeted actions from companies on reducing greenhouse gas emissions and wants members to support the efforts. Phase 2 will take effect in June.

According to a note from BlackRock, this new phase is part of the decision to modify its participation. When the asset management firm became a signatory in 2020, the group focused on corporate disclosures.

“This new strategy will require signatories to make a global commitment to use customer resources to pursue emissions reductions in investee companies through a stewardship commitment,” the statement reads. “In our view, making this new commitment for all of our assets under management would raise legal considerations, particularly in the United States.”

Fink, between 2018 and 2023, publicly supported “social purpose” and investing by focusing on environmental, social and governance principles in his annual letters to CEOs. But five years later, in 2023, he told the audience at the Aspen Ideas Festival that he was “ashamed” that ESG had become a political issue. “When I write these letters, it was never intended as a political statement… They were written to identify long-term issues for our long-term investors.”

For his part, Dimon in 2019 encouraged companies to focus on “stakeholder capitalism,” which he defined as corporate leadership that considers the needs of customers, suppliers, communities and shareholders. He chaired the influential Business Roundtable, which that year issued a statement on stakeholder capitalism. In 2022 he then tried to reassure the world that this did not make him “wake up”.

“I’m not awake,” he said. “And I think people are confusing stakeholder capitalism with being woke.”

The loss of support from JPMAM, SSGA and BlackRock – with combined assets of $17.2 trillion – significantly hampers Climate Action’s ability to pressure companies through shareholder proposals. They will also have less influence in negotiations and discussions with company boards, due to their reduced voting power in director elections, which typically take place annually at larger companies.

“Set fire to our investments”

Lander said the New York funds have asset management stakes in all three companies and chided them for being “part of the problem and not the solution.”

“Put simply: they are caving in to the climate deniers,” he said. “We cannot expect to preserve long-term value for beneficiaries when we set fire to our investments. Ensuring strong, long-term returns requires real-world decarbonization on the Paris Agreement timeline.”

In a statement to FortuneSSGA, like BlackRock, have claimed that Climate Action’s phase two strategy led to their withdrawal.

“After careful review, State Street Global Advisors has concluded that 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,” it said a spokesperson.

A spokesperson for JPMAM said in a statement that the asset management firm has made a “significant” investment in its stewardship team and engagement capabilities and has developed its own climate risk engagement framework. The fund company said climate change continues to present material economic risks and opportunities for clients and analysts who may factor it into engagements around the world.

“The firm has built a team of 40 professionals dedicated to sustainable investing, including investment management specialists who also leverage one of the largest buy-side research teams in the industry, with more than 300 analysts globally,” a spokesperson said .

Focus on Fink

Lander specifically called out BlackRock’s Fink in his statement. Fink, in his 2020 annual letter to CEOs, wrote that climate change has become a “determining factor in companies’ long-term prospects.” Fink wrote that evidence of climate risk has forced investors to reevaluate their fundamental assumptions about modern finance.

“Three years ago Larry Fink declared that climate risk is a financial risk, but today’s announcement makes a mockery of that recognition,” Lander said. “Putting clients who take climate risk seriously into their own little silo while voting the majority of BlackRock’s actions against even the most minimal climate disclosures is a failure of both leadership and fiduciary duty.”

The California Public Employees’ Retirement System (CalPERS), with assets valued at about $462 billion, had a similar reaction, albeit more moderately. In a statement, CEO Marcie Frost said CalPERS remains “firmly committed” to Climate Action 100+.

“The success of Climate Action 100+ depends on maintaining our collective resolve to continue doing the hard work necessary in the face of an existential crisis. This work is a vital part of our fiduciary duty to the 2 million California public employees who are members of CalPERS,” Frost said.

A spokesperson for Climate Action declined to comment on individual asset management firms, but said the group was still growing and that investor members were committed to getting companies to implement climate transition plans.

“More than 60 new signatories signed up last fall alone, and we expect the strong interest to continue,” the spokesperson said. “Importantly, the initiative continues as planned with hundreds of global investors still engaging with 170 companies – in this regard, Climate Action 100+ remains the largest investor-led climate change engagement initiative.”

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