By Simon Jessop and Ross Kerber
LONDON/BOSTON (Reuters) -State Street, the world’s third-biggest asset manager, said it is pulling the bulk of its operations out of the sector’s main global climate coalition despite the group’s efforts to retain members by relaxing its rules.
While giving no reason for the decision to remove its U.S. arm from the Net Zero Asset Managers initiative, a State Street spokesperson said the units serving its European clients would remain part of the group.
“We determined to redefine our membership in NZAM to our European entities in order to support those clients who have net zero investment goals and objectives,” the State Street spokesperson said.
The move by State Street Investment Management, which runs $5.4 trillion in assets, comes as other top U.S. fund firms also assess their membership in light of the rule changes, amid U.S. political pressure and ahead of global climate talks in Brazil.
NZAM CHANGED ITS MEMBERSHIP COMMITMENT STATEMENT
Launched five years ago to address the financial risks of climate change and provide a platform for collective action, NZAM has faced pressure from critics accusing it of potential breaches of antitrust law.
First Vanguard and then industry leader BlackRock quit the effort, prompting NZAM to conduct a review of its activities that culminated in confirmation on Wednesday that its membership rules would be relaxed. JPMorgan’s fund arm also left the group in March.
Going forward NZAM will no longer require members to reach net-zero portfolio emissions by mid-century nor to set interim targets. Instead members face easier asks like providing clients with information to act on climate risks.
State Street declined to specify the percentage of its assets that would remain covered by the NZAM membership or discuss the group’s new rules.
OTHER FIRMS ASSESSING MEMBERSHIP
State Street said its EU and UK entities remain “subject to our fiduciary duties to our clients” and noted its business “remains independent at all times in making investment decisions”.
The wording could counter claims in ongoing litigation in Texas where the U.S. state’s Republican attorney general has sued State Street, BlackRock and Vanguard over their climate records and cited their NZAM membership among other things as evidence of improper collective behaviour. In August a judge allowed most of the claims to continue.
Among other U.S. NZAM signatories, T. Rowe Price’s Global Head of Sustainability, Maria Elena Drew, said it would review whether to remain a signatory during a three-month evaluation period given by NZAM.
“Whether we do so or not, we remain committed to making investment and stewardship decisions with an understanding of all material risks and opportunities, including those relating to climate and the environment,” she said.
A representative for Wellington Management said via e-mail that it was currently reviewing the new NZAM commitment.
“We maintain the belief that material ESG issues, including climate considerations, can affect the long-term value of assets we invest in; therefore, it is in our clients’ best financial interests for us to analyze them.”
(Editing by Kirsten Donovan)
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