JPMorgan and State Street Withdraw from Investment Climate Pact Focused on Social Awareness

JPMorgan and State Street, two major asset managers, have recently withdrawn from the United Nations-led climate pact known as Climate Action 100+. This alliance, which consists of approximately 700 institutional investors with $68 trillion under management, aims to pressure companies into pursuing environmental goals. However, critics argue that the pact promotes “woke” investment priorities at the expense of profitability and the economy. The decisions by JPMorgan and State Street have been praised by Republican lawmakers and state attorneys general who believe that companies should prioritize return on investment rather than ideological goals.

The attorneys general have accused Climate Action 100+ of engaging in potential unlawful coordination and pushing policies through the financial system that cannot be achieved through democratic processes. Despite the withdrawals, Climate Action 100+ remains optimistic, noting that it has experienced significant growth since its establishment and that strong interest is expected to continue. The pact has gained over 60 new signatories in recent months and continues to engage with 170 companies on climate action.

JPMorgan Asset Management cited the development of its own climate risk engagement framework and significant investments in its stewardship capabilities as reasons for not renewing its membership in Climate Action 100+. State Street, on the other hand, expressed objections to the enhanced commitments required in phase two of the pact, which it believes would compromise its ability to act independently. Phase two focuses on pressuring companies to take concrete actions to combat climate change, going beyond the previous emphasis on climate-related financial disclosures.

In addition to the withdrawal from Climate Action 100+, BlackRock, the world’s largest asset manager, is also reportedly leaving the pact and transferring its participation to one of its smaller units. The financial industry’s departure from the climate pact raises questions about the future of ESG (environmental, social, and corporate governance) investing and its impact on various sectors.

Meanwhile, a report from conservative-leaning think tank The Buckeye Institute highlights concerns about the Biden administration’s net-zero climate-control policies. The report argues that these policies, driven by the ESG agenda, could have negative consequences for U.S. food production. It predicts a 34% rise in operational costs for farmers as a result of the administration’s net-zero emissions policies, which would also lead to higher grocery bills for consumers. Achieving the administration’s decarbonization goals would require aggressive emission reduction policies across all sectors of the economy, potentially impacting industries beyond energy.

Earlier this year, Republican state agriculture commissioners warned that membership in the U.N. Net-Zero Banking Alliance could harm farmers and threaten food security. These concerns highlight the ongoing debate surrounding ESG policies and their potential effects on various industries.

The decisions by JPMorgan and State Street to withdraw from Climate Action 100+ reflect a broader skepticism towards ESG-aligned investment strategies. Critics argue that these strategies prioritize ideology over financial performance and shareholder interests. As the financial industry navigates the intersection of sustainability goals and profitability, the future of ESG investing remains uncertain.