Concerns About Climate Initiative Among U.S. Asset Managers

By Isla Binnie and Ross Kerber

NEW YORK / BOSTON (Reuters) – Top U.S. asset managers fear that participating in an industry climate initiative could make them seem overly collaborative and attract regulatory scrutiny, as discussed in a recent report by a Republican-led U.S. Congressional Committee.

The report, released on Friday, forms part of a probe into alleged collusion among fund firms and activists, which the Republican majority claims is creating a "climate cartel" that pressures companies to reduce emissions. Democrats on the committee have dismissed these allegations.

Prominent fund managers have denied any wrongdoing; however, the report cites evidence that they were concerned about appearing too aligned with climate activist shareholder groups. BlackRock, in a 2019 email summary of a meeting with the Boston-based advocacy group Ceres, noted, "We don't do collective action/engagements. Too risky."

Similarly, State Street expressed concern in 2020 that joining a Ceres-backed initiative, Climate Action 100+, might give the impression of collaboration, leading to perceptions of "engaging or voting as a block," according to the report.

While both firms ultimately joined CA100+, they later withdrew from participation over concerns regarding their independence.

Republican officials, particularly those from oil and gas states, have criticized investors for coordinating efforts to pressure corporations on climate matters, arguing it may compromise corporate growth.

Last month, attorneys general from 11 Republican-led states filed a lawsuit against BlackRock, State Street, and Vanguard, claiming that their climate-focused actions harmed coal production and driven energy prices high. The three firms collectively manage $26 trillion. BlackRock and State Street have rejected allegations of misconduct, while Vanguard has chosen not to comment.

Former president Donald Trump, who opposed President Joe Biden’s climate initiatives, aimed to increase U.S. oil and gas output. Trump's administration may consider the findings of the congressional committee. A spokesperson for the committee declined to discuss any potential interactions with current or future administrations.