State Street withdraws US base from global climate group

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

State Street pulled its US operations out of what was once a leading climate action industry group, in a move symbolic of the retreat by money managers previously leading the charge in America.

It said it had decided that only its units serving UK and European clients would remain part of the Net Zero Asset Managers initiative. The initiative itself on Wednesday removed a reference to 2050 climate goals in its manifesto.

State Street, one of the world’s largest money managers, follows BlackRock, Vanguard and JPMorgan Asset Management, which have all left the NZAM in the US. JPMorgan and State Street both quit another green investor group, Climate Action 100+, last year. 

This followed threats of litigation from Republican-led states over what they alleged was collusion by financiers to withdraw funding from the fossil fuel industry, which is being boosted by the Trump administration.

Texas and other “red” states last year sued BlackRock, State Street and Vanguard, alleging they had conspired to reduce coal production to advance “green energy” policies.

The lawsuit pointed to the big three asset managers’ involvement in the Net Zero Asset Managers group and Climate Action 100+ as evidence. Vanguard was not a member of the CA100+ and quit the NZAM before the lawsuit was filed in 2022.

The pressure intensified after US Department of Justice and Federal Trade Commission in May warned that institutional investors could be in breach of federal antitrust laws if they used their holdings to influence corporate strategy.

NZAM began in 2020 as a platform for asset managers to publicly commit to aligning with the goal of net zero emissions by 2050. It suspended activities in January to reassess its future after BlackRock’s exit and on Wednesday released its updated criteria.

State Street said the “redefinition” of its NZAM status would have “no impact on our commitment to delivering sustainable investing solutions to our clients who hire us for our sustainable investment and reporting expertise and capabilities to help them achieve their net zero goals.”

Earlier this month a climate alliance of top global banks folded after this year losing its highest-profile members from Wall Street and European financial centres, as well as Japan and Canada. Both groups were set up with the backing of Mark Carney, now Canadian prime minister, when he was UN special envoy for climate action.

This year, zero environmental shareholder proposals passed during the US annual shareholder voting season for the first time in six years. This partly reflected the response from the largest passive investors such as Vanguard, which did not support any environmental proposals. BlackRock voted for less than two per cent of proposals related to climate and natural capital. 

Christophe Etienne, researcher at the campaign group Reclaim Finance, said the shift was “bad news” for asset owners, particularly pension funds, who would find it more challenging to understand which asset managers were serious about taking climate risk into account.

“The initial commitment was already extremely weak and nonbinding,” said Etienne. “This development confirms the financial sector’s disengagement and the weakening of net zero alliances.”

The NZAM downplayed the changes in its stance on Wednesday, saying signatories were asked to set their own climate targets as before, with a commitment to support investing in line with the global goal of net zero and recognising the importance to investment outcomes of keeping the rise in temperatures within Paris Agreement aims.