By Isla Binnie, Ross Kerber
NEW YORK/BOSTON (Reuters) -Top U.S. asset managers were worried that signing up to an industry climate initiative could make them appear to be working too closely together and draw regulatory scrutiny, according to a report released on Friday by a Republican-led U.S. congressional committee.
The report is the latest released by the U.S. House Judiciary Committee's Republican majority as part of a probe they say has shown fund firms and activists are part of a "climate cartel" that colludes through shareholder organizations pressing to cut emissions. The committee's Democrats have dismissed those allegations.
Top fund firms have denied wrongdoing, but material cited in the report shows they had always been concerned about appearing too cozy with shareholder groups engaged in climate activism.
BlackRock (NYSE:BLK)'s view in 2019 was that "We don't do collective action/engagements. Too risky," according to the report, citing an emailed summary of a meeting that unidentified BlackRock executives held with Ceres, a Boston-based environmental advocacy group, obtained by the committee.
Likewise State Street (NYSE:STT) also raised concerns around 2020 about "collusion" if it joined a Ceres-backed effort to press companies to cut emissions known as the Climate Action (WA:ACT) 100+, or CA100+, according to the report. The firm worried about raising the "perception of engaging or voting as a block," the report states.
BlackRock declined to comment. State Street did not comment. Both wound up joining the CA100+, then stepped back earlier this year, citing independence concerns, as the group sought for members to take stronger actions.
Republican officials, many of them from oil and gas producing states, have objected to investors coordinating to pressure corporate management on climate issues at the expense of corporate growth and returns.
Last month Republican attorneys general from 11 states sued BlackRock, State Street and Vanguard, saying their climate activism reduced coal production and boosted energy prices. The firms collectively manage $26 trillion. BlackRock and State Street have denied wrongdoing, while Vanguard has declined to comment on the matter.
U.S. President-elect Donald Trump campaigned against President Joe Biden's moves to fight climate change and promised to boost U.S. oil and gas production. In theory Trump's administration could follow up on the congressional committee's findings.
A spokesperson for the committee declined to comment on what talks, if any, it may have had with current or future administrations.
A section of the committee's report describes how the top fund firms helped elect dissident directors at energy leader Exxon (NYSE:XOM) in 2021, under pressure by activists including Ceres.
In a statement Ceres said: "The claims in the U.S. House Judiciary Committee report are completely false. Climate Action 100+ does not control how shareholders vote, nor has it ever done so."
Moreover, the dissident directors have been overwhelmingly reelected in each year since, Ceres said, a result "completely inconsistent with the claim that they were somehow a hostile force in the company."