The world’s largest investor-led engagement initiative, Climate Action 100+, seems to be at a crossroads. Aware of the need to reassert its raison d’être, just a couple of months ago, the initiative’s steering committee announced a relaunch. CA100+ Phase 2 is supposed to shift the signatories’ focus from merely demanding climate disclosures from top emitters to insisting on implementing climate transition plans. “Phase 2 is the time to demonstrate the additionality of the initiative,” commented Francois Humbert, Chair of the steering committee, at the launch of CA100+ version 2.0 in June.
Fast forward to August, and at least three signatories are reportedly leaving the initiative: Loomis Sayles, an affiliate of Natixis Investment Management with USD 310 billion in AuM, Walter Scott Asset Management, a subsidiary of BNY Mellon Investment Management, with USD 81 billion in AuM, and PanAgora, an independent asset manager with USD 32 billion in AuM.
Arguably, this is just a drop in the ocean for an initiative boasting some 700 investor signatories responsible for USD 68 trillion in AuM. Also, both Natixis and BNY Mellon have since pointed out that the decision to leave is limited to individual autonomous affiliates and that the rest of their subsidiaries remain faithful to the initiative.
Still, the fact that some serious asset management organisations with a long-term commitment to responsible investing are now choosing to withdraw from the engagement coalition is bound to raise some concerns.
“We are pleased to join many of our industry colleagues in committing to CA100+ and the powerful opportunity it presents to help ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change,” stated an enthusiastic Kevin Charleston, Loomis Sayles Chairman & CEO just a couple of years ago, upon entering the initiative in 2021.
Walter Scott AM, meanwhile, has been a member of CA100+ since 2018, when the collaboration commenced in earnest. “Engagement has always been central to what we do,” declares the asset manager on its website, further elaborating on the systematic and granular approach the firm’s portfolio managers apply in their stewardship efforts.
So, what made them change their minds about being a part of CA100+? The exiting signatories have been rather reticent on the topic. “Our ESG philosophy remains unchanged: we believe risks and opportunities associated with material ESG factors are inherent to investment decision-making and clients’ long-term financial success,” comments a spokesperson for Loomis Sayles. “In service of our fiduciary duty, we believe the best way to consider ESG is through integration that aims to identify the financial materiality of ESG factors.”
I don’t know about you, but this ‘fiduciary duty’ explanation sounds rather thin to me. Left to guess as to the actual reasons for the exit, I could think of a few, in the context of an opinion piece at least.
For one, there is mounting disenchantment with the engagement method in general and CA100+’s specific tactics, particularly regarding the oil and gas sector. “After five years of collective efforts through CA100+ to try to steer these companies in a greener direction, we think it’s time to focus our efforts elsewhere,” shared Sandra Metoyer, CFA, Head of Sustainable Investments at Velliv, recently. There is simply no hiding away from the rather disappointing results achieved so far.
There is also the persistent pushback against everything ESG-related in the anti-woke political circles of the US. The way CA100+ operates should, in theory, protect its members from the antitrust accusations that some attorneys general are waving around, yet the threat is real. The scary AGs were indeed enough to trigger a mass exodus from the Net-Zero Insurance Alliance (NZIA) earlier this year.
Insufficient resources are another likely explanation. Effective stewardship is labour-intensive and thus a plausible offer in times of cost-cutting. And although collaborations like CA100+ could be viewed as a ‘partial antidote’ to the resource scarcity, as Rickard Nilsson, Head of Stewardship Success at financial technology company Esgaia, recently told us, committing to such an initiative, too, requires adequate staffing.
Or, perhaps CA100+ has simply run its course as initially envisioned. It was supposed to be a 5-years project, or experiment if you prefer, remember?
Yet there is still so much to be done! I, for one, hope that the rest of the CA100+ signatories will persevere in their efforts to sway the world’s largest corporate greenhouse gas emitters into taking the necessary action on climate change. And get better at it along the way.
