The increasing number of global asset managers who are exiting the Climate Action 100+, probably the largest investor-led initiative aimed at reducing greenhouse gas (GHG) emissions, has become alarming as it could substantially weaken the collective influence of the financial industry on climate action.

In the last month alone, major asset managers that have withdrawn from the initiative due to heavy political pressure from the US Republican party include Goldman Sachs Asset Management, US-based subsidiaries of Franklin Templeton and Sun Life Financial, Mellon Investments, TCW Group and Segal Marco Advisors. Earlier, J.P. Morgan Asset Management and State Street also withdrew from the Initiative. There are still others who are reportedly in the process of completing their withdrawal as of this writing.

Many of these asset managers have extensive business interests in the Asia-Pacific region and substantial assets from Asian institutional investors that are reliant on these managers for their own GHG emission reduction targets and climate action compliance.

A weaker Climate Action 100+ initiative is likely to reduce pressure on companies to improve their climate policies and GHG emissions, weaken collective shareholder action from investors and asset managers, as well as send a strong signal to the financial markets that climate-related risk is not important.

The political pressure is coming from the Republican-led House judiciary committee, which is investigating the activities of Climate Action 100+ for potential violation of US antitrust laws.

The committee issued the subpoena on June 14 2023, demanding the preservation and production of documents from Climate Action 100+ and related organizations. But it is taking time for many of the global asset managers to take action since many of them have undertaken commitments dealing with the GHG reduction of their respective organizations under the Initiative.

The committee’s action is part of an investigation to allegations that Climate Action 100+ may be using anti-competitive measures to pressure asset managers to comply with its climate-related initiatives.

Initially launched in 2017 as a five-year initiative, Climate Action 100+ announced in 2022 that it would run up to 2030. In 2023, it announced its phase 2 strategy to run up until 2030.

According to its latest status report entitled Progress Update 2023, published on July 2023, the initiative counts approximately 700 signatories (including investors, asset managers and 170 focus companies) responsible for a collective total of US$68 trillion in assets under management.

There is a consensus among investors that Climate Action 100+ has been effective in engaging companies on improving climate change governance, reducing emissions and strengthening climate-related financial disclosures in order to create long-term shareholder value.

One of the most significant achievements of Climate Action 100+ is getting many of its focus companies to commit to net-zero emissions by 2050 or sooner. As of 2023, over 70% of the companies engaged by Climate Action 100+ have committed to net-zero targets. This is a substantial shift, according to its Progress Update 2023 report, reflecting the initiative’s influence in driving corporate climate action.

The initiative has also helped pushed companies to improve their governance related to climate risks and opportunities, enhancing the quality and transparency of corporate climate-related disclosures, as well as challenged critics of climate change and regional disparities in GHG emissions across sectors and regions.