The landscape of climate-focused investing just got a little more uncertain. Goldman Sachs Asset Management has officially joined the ranks of major financial players stepping away from Climate Action 100+, a powerful investor network aimed at pushing the “world’s largest greenhouse gas emitters to reduce their emissions, improve governance, and enhance climate-related financial disclosures”.
This move follows similar exits by, JPMorgan Asset Management, State Street Global Advisors, and several others. So why the exodus, and what does it portend for sustainable financing going forward? A complicated web of political forces, changing corporate strategies, and the increasingly contested role of environmental, social, and governance (ESG) factors in investment decisions are, for the most part, the answers.
Amidst growing scrutiny from U.S. political figures, in July, the House Judiciary Committee sent letters to over 130 CA100+ participants, including Goldman Sachs Asset Management, accusing them of colluding with climate activists to adopt ESG-related goals that could potentially violate U.S. antitrust laws. This political pressure has undoubtedly contributed to the decisions of several asset managers to leave the group. For firms like JPMorgan and State Street, the political heat, combined with a desire to pursue independent climate strategies, made participation in the coalition increasingly untenable.
These departures come at a critical time for Climate Action 100+, which had only recently introduced its “phase 2” requirements. According to these new criteria, member firms must not only communicate with other companies about climate risk, but also put their own climate transition plans into action and submit thorough reports on their engagement tactics. Some people reevaluated their participation in the coalition because they felt that these criteria went too far.
The exits of companies like as Goldman Sachs and JPMorgan may indicate a change in the financial sector's stance on climate change, but they also underscore the continuous conflict between investment strategies motivated by profit and the pressing requirement for environmental responsibility. The entire world will be watching to see how Climate Action 100+ handles this new reality and whether it can still have an impact on corporate behavior internationally once the dust settles.
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