CA100+ Reaching Goals Despite Anti-ESG Efforts
Notwithstanding well-publicised exits, the investor initiative is still making progress on objectives and attracting signatories.
Climate Action 100+ (CA100+) has continued to make meaningful progress towards its objectives, amid the departures of some large US asset managers from the investor-led engagement initiative in the wake of an anti-ESG backlash, according to investor network Ceres.
“The most important thing about this initiative is that we’re seeing real corporate action,” said Reverend Kirsten Snow Spalding, Vice President of the Ceres Investment Network. “That’s the focus, and for asset owners that should be what matters. There has been a dramatic amount of progress, so we’d encourage asset owners to join the initiative.”
Ceres is one of CA100+’s five supporting investor networks.
Published last October, CA100+’s latest net zero company benchmark results showed 82% of focus companies have set long-term GHG reduction targets and 87% have set medium-term targets, while 29% disclosed how much they invested in climate solutions in the past year during the first year of the metric’s introduction.
CA100+’s Benchmark assessments are updated annually in October each year, with the first edition published in 2021. The assessments gauge the performance of focus companies against the initiative’s three high-level goals: emissions reduction, governance, and disclosure on and implementation of net zero transition plans.
In June 2023, CA100+ launched its second phase which saw focus shift from corporate climate-related disclosure to the adoption of climate transition plans by corporates. Running until 2030, it targets a global increase in active ownership and the creation of long-term shareholder value.
“CA100+ will move the needle with phase two despite the departures,” said John Kostyack, Adviser to Sierra Club’s Fossil-Free Finance campaign. “The core idea behind phase two – that we need a systematic and collaborative approach to investor engagement with carbon-intensive companies – is absolutely the right idea.”
Greater expectations
Phase two introduced a new ‘lead sector investor’ category. Lead investors are required to submit an annual schedule of engagement, specifying actions and escalations strategies they intend to deploy, and are expected to disclose votes and rationales on CA100+ flagged votes.
Despite consulting signatories on phase two, State Street Global Advisors specifically said it was leaving CA100+ due to the changes, while JP Morgan Asset Management (JPMAM) did not renew its membership for similar reasons.
In recent weeks, asset managers Nuveen and Goldman Sachs Asset Management have left the CA100+, citing different reasons for doing so. This followed Invesco, JPMAM, State Street Global Advisors, Pimco, and TCW Group departing earlier this year, while BlackRock transferred its membership to its BlackRock International affiliate.
However, CA100+ currently has well over 600 signatories from more than 30 countries with approximately US$50 trillion in combined AUM. Since July 2023, 85 signatories have joined while only around 20 have voluntarily withdrawn. It is also still backed by significant US asset managers, including Franklin Templeton, MFS, Neuberger Berman, Northern Trust, and Wellington.
“The inquiries and questioning do create a climate in which investors have to ask whether it is worth staying,” said Spalding. “The media around this has been a challenge, because it suggests that investors are divided in their concern about these issues, but CA100+ remains the largest investor initiative and continues to grow in terms of numbers.”
Heightened attention
Established in 2017, CA100+ aims to collectively supporting the goals of the Paris Agreement by challenging the large corporate greenhouse gas emitters to take action on climate change. It has engaged more than 170 heavy-emitting firms representing a total market capitalisation of US$10.3 trillion across sectors including oil and gas, aviation, mining and consumer goods.
However, the initiative has become a target for US politicians seeking to characterise investors’ climate-related engagements as detrimental to jobs and prosperity, which some have credited for the recent exits of managers.
“CA100+ is apolitical, and it’s unfortunate that this has become a political issue when the real issue for investors in the initiative is about risks and opportunities around climate change,” said Spalding, adding the initiative has been misrepresented, especially with regard to antitrust allegations.
Last month, the US House Judiciary Committee, led by its Republican chairman Jim Jordan, sent letters to 130 financial organisations, including Nuveen and Goldman Sachs Asset Management, which branded their CA100+ membership as involvement in a “woke ESG cartel”.
However, in April, a report from Morningstar found the proxy-voting records for 20 high-profile climate resolutions last year contradicted accusations of collusion levelled at CA100+, supporting the initiative’s rebuttal of the allegations from some US Republican politicians.
“In a real sense, the attacks by Republican legislators have elevated the profile and the salience of the initiative as a signal of those investors who take climate change seriously and will not be bullied out of co-operating publicly to protect the long-term interest of their clients,” said Lisa Hayles, Director of International Shareholder Advocacy at Boston-headquartered Trillium Asset Management, which is owned by Australia’s Perpetual. “Right-wing politicians have falsely turned this initiative into a bogeyman – if only it had a quarter of the power and influence they say it does.”
CA100+ has been credited with having a key influence in more companies having a Paris-aligned transition plan. Approximately 6,000 companies providing data to CDP now have a plan in place, while a further 8,000 say they will have transition plans in place by 2025.
“I cannot overstate the importance of getting involved in the fight for investors’ freedom to address climate risk and otherwise make responsible investment and voting decisions,” said Kostyack. “Hidden transition risk, and hidden physical climate risk, are major threats to the livelihoods of billions of people around the world. If the anti-responsible investing forces can somehow emerge victorious in their attacks on CA100+, there is no reason to believe they will stop there.”
Continued asset owner support
Last month, 64 asset owners representing US$5.5 trillion in assets signed a statement led by the California State Teachers Retirement System (CalSTRS) on the importance of CA100+ involvement. It also highlighted collaborative engagement between investors through CA100+ as being an “effective and efficient” way to address both specific and systemic risks to investments arising from climate change.
Pension fund signatories included Denmark’s AkademikerPension, the US’ California Public Employees’ Retirement System, CalSTRS, and the UK’s Church Commissioners for England, and Railpen.
“We believe that by working collaboratively, investors can more effectively and efficiently motivate the world’s largest corporate greenhouse gas emitters to adopt sustainable business practices,” said Aeisha Mastagni, Senior Portfolio Manager, Sustainable Investment and Stewardship Strategies Team at CalSTRS. “Moving forward, CalSTRS and its CA100+ partners will focus on further action to address systemic climate risk, the fiduciary duty to mitigate said risks and the vital role collaborative engagement continues to play in these efforts.”
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