Dive Brief:

  • The House Judiciary Committee said its years-long probe into ESG has found evidence that a “climate cartel” of left-wing environmental groups and financial institutions has “colluded to force American companies to decarbonize,” according to an interim report released Tuesday.
  • The committee’s Republican majority said that the coalition of groups pushing for decarbonization “has declared war on the American way of life” and has agreed to “force corporations” into slashing their emissions and committing to net-zero targets.
  • The committee’s probe, led by its majority and Chair Jim Jordan (R-Ohio), has resulted in subpoenas to climate coalitions like Climate Action 100+, pension funds in liberal states like California, environmental and shareholder advocacy groups like Ceres and As You Sow, as well as large asset managers, proxy advisors and activist investors.

Dive Insight:

The committee has investigated various climate coalitions and ESG groups as part of its oversight into existing U.S. antitrust laws and whether they are adequate and sufficient. The committee has accused groups like Climate Action 100+ and the UN-backed Glasgow Financial Alliance for Net Zero of having enough collective market cap to force the rest of the space to comply with their goals.

The groups are being accused of colluding to decarbonize companies “by leveraging negotiations with management, shareholder resolutions, and board of director votes,” the committee said in a release. Additionally, the GOP-led panel accused the groups of forcing companies to disclose and reduce their carbon emissions and enforce their internal disclosure and reduction commitments by “handcuffing and restricting company management.”

“Based upon the evidence obtained by the Committee, the members of the climate cartel are colluding toward a common goal: the ‘decarbonization’ of American industry, which necessarily reduces output and increases prices for American consumers,” the report said.

The Judiciary Committee has received and reviewed more than 270,000 documents — amounting to more than 2.5 million pages of material — of non-public information as part of the investigation, according to the report. Receiving that information included subpoenas to GFANZ, Ceres, and As You Sow,  the big three asset managers in BlackRock, State Street and Vanguard, activist investor Arjuna Capital and proxy advisors Institutional Shareholder Services Inc. and Glass, Lewis & Co.

The report called Climate Action 100+, Ceres, the California Public Employees’ Retirement System and Arjuna Capital “four of the most radical offenders” of the so-called “climate cartel.” The committee alleges that altogether, the financial ecosystem is looking to change “disfavored companies” through engagement and the use of ESG principles.

Climate Action 100+ is accused of facilitating collusion as a “collaborating” and “convening” group. The report also claims Climate Action 100+ is responsible for escalating and flagging “collusive engagements against disfavored companies.” However, the committee’s report takes credit for increasing pressure on the group and its loss of JPMorgan Chase and State Street in February. BlackRock announced it would transfer its membership in the group to an international arm of its business the same day.

According to the reports findings, the committee accused climate nonprofit Ceres of coordinating collusive engagements and took issue with CalPERS’ opposition to ExxonMobil’s CEO and board of directors ahead of the energy giant’s late May board meeting. The fund and other state finance officials publicly opposed the slate due to Exxon’s ongoing legal battle against Arjuna Capital. The committee accused Arjuna and other activist investors of making “draconian demands” of corporations, despite holding small stakes in those companies. 

As You Sow CEO Andy Behar, who also received a subpoena to appear before the committee in March, previously told ESG Dive on separate occasions that he does not see how ESG is related to antitrust laws, and shareholders have the right to ask companies about any material risks they identify.

Despite the report’s issuance, the probe is still described as ongoing in its conclusion. The committee said it will supplement the report with additional information as needed.