States Issue Warnings to BlackRock and JPMorgan Over Prioritizing Sustainability in Long-Term Investment Decisions
In a significant move, a coalition of 21 U.S. states has penned letters to CEOs of major investment firms, expressing concerns about the integration of sustainability and climate considerations in their investment strategies. The letters, signed by state officials from Alabama to Wyoming, urge financial institutions like BlackRock, Goldman Sachs, and Vanguard to reconsider their strategies, claiming that this integration reflects a pursuit of ideological objectives under the guise of long-term risk mitigation.
The state officials argue that voting decisions should be aligned with shareholder value, not environmental or social goals imposed by activists. They claim that potential risks, often uncertain and already accounted for in insurance and financial markets, are framed as certain and catastrophic to justify forcing companies to take immediate actions that may not align with their long-term business interests.
The letters request that the financial institutions abstain from using international political agendas, such as net zero mandates, natural capital frameworks, or the EU's CSRD sustainability reporting regulation, in their investment strategies and engagement. They also ask for disclosure of participation in sustainable investment-focused groups like Climate Action 100+, GFANZ, or PRI.
The state treasurers and financial officers, however, are not entirely against the incorporation of sustainability and climate considerations. Oregon, for instance, has enacted a climate investing law that mandates evidence-based investing with climate factors integrated in financial decisions. Oregon's Treasurer Elizabeth Steiner advocates for laws and mandates that embed climate risks and sustainability in portfolio decisions.
The letters acknowledge some positive steps taken by firms, such as withdrawing from climate coalitions, scaling back ESG rhetoric, and proxy voting changes. However, they emphasize that more work is needed. The letters expect detailed evidence that the investment practices, proxy voting, and corporate engagement behavior of the financial institutions align with traditional fiduciary standards and comply with applicable state laws.
This development is part of a series of anti-ESG moves by U.S. politicians, which has gained momentum since the election of President Trump. The ongoing negotiations on sustainability regulations reflect a broader governmental push to enhance the role of climate considerations in investment oversight. The letters sent to financial institutions request that they commit to not using passive investment vehicles for activist proxy voting or corporate engagement.
The letters are a clear indication of a growing divide in the U.S. regarding the role of sustainability and climate considerations in investment strategies. As the debate continues, it remains to be seen how the major investment firms will respond to these concerns and whether they will adjust their strategies to align more closely with the expectations of these U.S. states.
- The state officials, in their letters to major investment firms, are urging for a reevaluation of sustainable investment strategies, asserting that aligning voting decisions with shareholder value, rather than environmental or social goals, is more fitting.
- The ongoing negotiations on sustainability regulations in the U.S. reflect a broader governmental push towards enhancing the role of climate considerations in investment oversight, with the letters sent to financial institutions highlighting the importance of compliance with applicable state laws.
- While advocating for more transparency in sustainable investment practices, the state treasurers and financial officers have acknowledged some positive steps taken by firms, such as withdrawing from climate coalitions and changes in proxy voting, but expect further evidence aligning with traditional fiduciary standards.
