The recent departures of major players like JPMorgan Asset Management (JPMAM) and State Street Global Advisors (SSGA) from Climate Action 100+ have sent shockwaves through the investor landscape for climate action. These exits, coupled with BlackRock’s downgraded participation, raise critical questions about the group’s effectiveness and future trajectory.

JPMAM’s move was attributed to its own robust internal engagement capabilities, suggesting a sense of self-sufficiency in achieving climate goals. They stated: “J.P. Morgan Asset Management (JPMAM) is not renewing its membership in Climate Action 100+ in recognition of the significant investment it has made in its investment stewardship team and engagement capabilities, as well as the development of its own climate risk engagement framework over the past couple of years.“

SSGA, however, expressed concerns about the group’s “phase 2” requirements, which shift the focus from mere disclosure to active emissions reduction. They said: “SSGA has concluded the enhanced Climate Action 100+ phase 2 requirements for signatories are not consistent with our independent approach to proxy voting and portfolio company engagement.” BlackRock echoed similar concerns, citing potential conflicts with US laws regarding fiduciary duties.

These decisions cannot be viewed in isolation. The growing political pressure in the US, particularly from Republican lawmakers and certain states, has significantly impacted ESG investing and groups like Climate Action 100+. Accusations of “boycotting” the fossil fuel industry and violating antitrust laws have led to several states barring firms involved in such groups from doing business with them. This creates a chilling effect on climate engagement efforts, making it difficult for investors to actively push for corporate climate action.

Despite these setbacks, Climate Action 100+ remains defiant, claiming continued growth with over 60 new members joining since the phase 2 changes. They emphasize their commitment to engaging with companies and influencing their climate policies, highlighting their track record of success.

However, the key question remains: can Climate Action 100+ effectively hold companies accountable without the backing of major financial institutions like JPMAM, SSGA, and BlackRock? While the continued growth signifies resilience, the group faces an uphill battle. Navigating the increasingly politicized landscape surrounding ESG investing requires a delicate balance between advocating for impactful change and navigating the complex political and legal environment.

Several factors could influence the group’s future. The outcome of legal challenges against states targeting ESG practices could offer some clarity. Additionally, the political landscape in the US, particularly after the upcoming elections, could significantly impact the group’s ability to operate and engage effectively.

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Furthermore, Climate Action 100+ itself needs to adapt. Doubling down on its “phase 2” strategy while addressing the concerns raised by departing members could be crucial. Building stronger coalitions with smaller, more agile investors and international partners may also be necessary to diversify its membership and ensure its long-term viability.

Ultimately, the story of Climate Action 100+ is far from over. While the recent departures are undoubtedly a setback, they also serve as an opportunity for introspection and adaptation. The group’s ability to navigate the complex political and legal landscape, build broader coalitions, and demonstrate its effectiveness in driving real-world emissions reductions will be key to its future success and the broader push for climate action through investor engagement.