Financial titans JP Morgan Asset Management and State Street announced in mid-February that they are pulling out of the Climate Action 100+ coalition. BlackRock, a primary driver of the dangerous Environmental, Social, Governance (ESG) agenda, is scaling back its participation in the coalition. Together, these companies have control over an estimated $15 trillion in assets. Their exodus is a good start, but it’s not nearly enough.
It’s likely that the firms are bolting from the coalition more out of self-interest than from a sincere change of heart. In late 2022, the House Judiciary Committee initiated an antitrust investigation of the coalition, which committee members wrote “seems to work like a cartel” in dictating certain climate-related measures to companies within their financial orbit.
Climate Action 100+ members leverage the massive portfolios under their management — which include state pension funds and hardworking Americans’ retirement nest eggs – to force companies to advance ideologically driven agendas, with the ultimate goal of shutting down American energy producers. It shouldn’t be surprising that seed money to launch Climate Action 100+ was provided by the Sea Change Foundation, a group which congressional investigators accuse of operating as a “conduit for Russian funding.”
It’s abusive enough that these firms are using their investors’ assets – often without the investors’ knowledge or consent – to pursue an activist agenda with which many of those investors passionately disagree. But equally bad and more consequential, studies confirm that such investing schemes result in lower returns for state pension and retirement funds. When the self-appointed elite abandon their fiduciary responsibility and prioritize their pet political goals over maximizing the financial return for their clients, that crosses a line.
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Over the past few years, state treasurers and financial officers have worked hard to persuade banks and investment managers to return their focus to financial return and traditional conceptions of fiduciary duty. The decisions by JP Morgan Asset Management and State Street not to renew their membership in the Climate Action 100+ coalition is an important step. But both companies have a lot of work to do to regain people’s trust as a fiduciary focused on financial return, and deeply troubling concerns yet remain.
Many of these banks and asset managers have “made significant investments in developing its own climate risk engagement framework,” as a spokesperson for JP Morgan recently stated. It remains to be seen what those frameworks look like and how they may impact state investments and banking assets.
More disconcerting, these large banks remain members of the Net Zero Banking Alliance, where they have made commitments essentially the same as those made when joining Climate Action 100+. The key NZBA commitment is to “transition all operation and attributable GHG emissions from our lending and investment portfolios.” That means banks like JP Morgan promise to reduce their customers emissions, even if it means debanking customers who don’t align with their net zero ambitions. Indeed, JP Morgan publishes its goals to debank customers in specific industries when those customers don’t align with net zero priorities, including tailpipe emissions policies designed to force Americans to switch from gas-powered cars to unpopular electric vehicles. The policy closely aligned with a Biden administration regulation that was so reviled that on February 17, the White House delayed effective dates until after 2030.
Under NZBA, large banks give the United Nations Environment Programme – the same people who encouraged Sri Lanka to abandon fertilizer, which destroyed its rice crop and tanked its economy – the authority to oversee the bank’s lending and investments to make sure they line up with net zero.
BlackRock and State Street remain members of the Net-Zero Asset Managers initiative, from which Vanguard fled in 2022. This initiative requires members to use voting and corporate meetings across all assets under management to get their portfolio companies to align with net zero. Like it or not, if you own any JP Morgan fund, your shares are used to pressure companies to align with net zero.
The asset managers’ continued membership in NZAM, like NZBA calls into question whether their exit from Climate Action 100+ reflects a genuine shift. There is no reason for a financially-focused fiduciary to make these commitments. Any bank or asset manager that wants to be viewed as trustworthy and focused on financial return should leave these groups.
The recent withdrawals from Climate Action 100+ is important because it demonstrates that it is possible to successfully stand up to corporate elites’ efforts to impose their dangerous ideological agenda on Americans while being derelict in their fiduciary duties. At the same time, they have made it obvious that they will not take their duties seriously until they are held fully accountable. We must not fail to do so.
Derek Kreifels is the CEO of the State Financial Officers Foundation.
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