The chief financial officer who oversees five New York public pension funds with $242 billion in assets has this to say to BlackRock CEO Larry Fink’s wealth management firm and Jamie Dimon’s JP Morgan Asset Management: You guys are failing.
“By giving in to the demands of right-wing politicians funded by the fossil fuel industry and abandoning their Climate Action 100+ commitments, these enormous financial institutions are failing in their fiduciary responsibilities and putting trillions of dollars of their clients’ assets at risk,” the city comptroller said in a statement. New York Brad Lander. “Climate risk is financial risk. Today, BlackRock, JPMorgan and State Street choose to ignore both.”
JP Morgan Asset Management and State Street Global Advisors pulled out as part of Climate Action 100+, a representative of the group confirmed Luck. Climate Action is a global initiative of 700 investors with more than $60 trillion in assets that engages with public companies on net-zero strategies and timelines. BlackRock withdrew from its corporate membership and transferred its participation to BlackRock International several weeks ago, the asset management company 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 intended to see more targeted action by companies to reduce greenhouse gas emissions and wanted its members to support those efforts. Phase 2 will go into effect this June.
This new phase was part of the decision to change its involvement, according to BlackRock. When the asset management company signed the agreement in 2020, the group focused on corporate disclosure.
“This new strategy will require signatories to make a comprehensive commitment to using customer assets to achieve emissions reductions at investee companies through participation in governance,” the note said. “In our view, the adoption of this new liability for our assets under management will raise legal issues, particularly in the United States.”
Between 2018 and 2023, Fink publicly advocated “social purpose” and investing with an emphasis on environmental, social and governance principles in his annual letters to CEOs. But five years later, in 2023, he told an 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 to be a political statement… They were written to highlight long-term issues for our long-term investors.”
For his part, Dimon in 2019 called on 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 issued a statement on stakeholder capitalism that same year. Then in 2022, he tried to reassure the world that it didn’t make him “woke.”
“I didn’t wake up,” he said. “And I think people mistake stakeholder capitalism for being woke.”
The loss of support from JPMAM, SSGA and BlackRock – with combined assets of $17.2 trillion – significantly limits Climate Action’s ability to pressure companies through shareholder proposals. They will also have less leverage in negotiations and discussions with company boards due to fewer votes in director elections, which are typically held annually at the largest companies.
“Let’s set our investments on fire”
Lander said New York funds own wealth management assets from all three firms and chided them for being “part of the problem, not the solution.”
“Simply put: they are giving in to climate deniers,” he said. “We cannot expect to maintain long-term value for beneficiaries when we burn through our investments. Securing high and long-term incomes requires real decarbonization of the world in accordance with the timetable of the Paris Agreements.”
In a statement for LuckSSGA, like BlackRock, said Climate Action’s phase two strategy led to their conclusion.
“After careful analysis, 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 participation,” the spokesperson said.
A JPMAM spokesperson said in a statement that the asset management firm has made “significant” investments in its coordination team and engagement capabilities, and has developed its own climate risk engagement framework. The fund firm said climate change continues to pose significant economic risks and opportunities for clients and analysts to factor it into their actions around the world.
“The firm has built a team of 40 dedicated sustainable investing professionals, including investment management specialists, who also utilize one of the largest procurement research teams in the industry—with more than 300 analysts worldwide,” the spokesperson said.
Focus on Fink
In his statement, Lander specifically mentioned BlackRock’s Fink. Fink in his Annual Letter 2020 CEOs, wrote that climate change has become “a determining factor in companies’ long-term prospects.” Fink wrote that the climate risk data has forced investors to reconsider their basic assumptions about modern finance.
“Three years ago, Larry Fink said climate risk was a financial risk, but today’s announcement makes a mockery of that admission,” Lander said. “Putting clients who take climate risk seriously into their own little box while voting a majority of BlackRock shares against even the most minimal climate disclosure is a failure of both leadership and fiduciary duty.”
The California Public Employees’ Retirement System (CalPERS), which has approximately $462 billion in assets, has drawn a similar, albeit more moderate, response. In a statement, CEO Marcie Frost said CalPERS remains “strongly committed” to Climate Action 100+.
“The success of Climate Action 100+ depends on maintaining our collective resolve to continue to do the hard work required 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 spokesman for Climate Action declined to comment on individual asset management companies but said the group was still growing and that its investor members were determined to force companies to implement climate change plans.
“More than 60 new participants joined the agreement last fall alone, and we expect strong interest to continue,” the spokesperson said. “Importantly, the initiative continues as intended, with hundreds of global investors remaining committed to engaging 170 companies – making Climate Action 100+ the largest investor engagement initiative in the fight against climate change.”