State Street withdraws from $68 trillion climate investing group - The Boston Globe
State Street withdraws from $68 trillion climate investing group
State Street Corp. is pulling out of the world’s biggest investor group devoted to tackling climate change, saying the organization has hamstrung the firm’s own approach to the matter and its ability to interact with corporations.
The Boston-based firm’s asset-management arm, with $4.1 trillion of client wealth, concluded that the latest requirements from Climate Action 100+ “are not consistent with our independent approach to proxy voting and portfolio company engagement,” State Street Global Advisors said in a statement Thursday.
The broader finance industry is shifting course on its approach to climate change amid political backlash from Republicans who have opened investigations into firms’ climate and environmental, social, and governance policies.
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The climate group, which was set up in 2017 to press corporations to cut greenhouse emissions, said last year it would ramp up efforts to get companies to turn their pledges on climate change into real-world action. The group comprises more than 700 investors with $68 trillion of assets.
State Street said in the statement that it’s withdrawing from the group in response to last year’s new goals, which are meant to run until 2030. The decision comes on the same day that JPMorgan Asset Management said it’s also leaving the coalition.
CA100+ has asked members to encourage companies they invest in to reduce emissions, enhance corporate disclosures, and implement transition plans to deliver on targets. Lead investors will be asked to submit annual schedules of engagement, specifying actions and strategies they plan to use, according to the group’s website.
The new goals came as Republican lawmakers ramped up pressure on financial firms over ESG.
State Street, BlackRock Inc., and Vanguard Group Inc. have been subpoenaed by a Republican-led panel in the US House of Representatives for documents related to their ESG policies. The House Judiciary Committee is investigating firms for potential collusion and violations of US antitrust law stemming from their work to combat climate change.
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The increasing scrutiny has prompted some of the world’s biggest financial firms to withdraw from international groups and emphasize their independence and own decision-making processes. Vanguard pulled out of the Net Zero Asset Managers initiative, while Munich Re and Axa SA are among firms that walked out of the Net-Zero Insurance Alliance.
The main approach for CA100+ has been engagement rather than divestment, seeking to rely on big investors’ clout to persuade corporations around the world to decarbonize. While the effectiveness of this method is under debate, getting the dirtiest companies to reduce emissions is considered necessary to curb climate change.
Since CA100+ was founded in 2017, carbon emissions have continued to rise. Large emitters lost their appetite for cutting emissions while energy prices were elevated, and governments focused on energy security following Russia’s invasion of Ukraine.
The group said in June that its next phase would be devoted to “active ownership.”
Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”