“Here’s the good news for all those raising questions about antitrust or groups or concert parties – you can sleep easy at night,” says Anne Simpson, global head of sustainability at Franklin Templeton.
This reassurance is aimed at members of Climate Action 100+, the collaborative engagement initiative she helped to launch in 2017, and which has recently become a target for the anti-ESG movement in the US.
As well as being used by the likes of Texas as evidence of fossil fuel boycotts by financial institutions, it has been seized upon by Republican politicians and officials as proof of collusion – or acting-in-concert – on environmental issues.
Arkansas senator Tom Cotton has accused CA100+ of violating antitrust law, while Arizona attorney-general launched an investigation into the scheme on similar grounds. And on 6 December, Republicans on the House Judiciary Committee called it a “climate-obsessed corporate cartel”.
Simpson, who was one of the prime movers behind CA100+ and still sits on the steering committee, says these allegations are unfounded.
She notes that, from the start of the initiative, the problem of collaboration was carefully considered. “We were mindful that, although we may be facing a systemic risk that needs to be tackled in common, we cannot work as a cabal or a cohort or a group,” she says.
“Our members act according to their own fiduciary duty. If you look at the governing documents of the initiative, the legal work that we have done, it was carried out in a very thoughtful way.
“To be acting in breach of anti-trust law we would have to be a cabal. And we’re not. These are fiduciaries acting in the best interests of our clients and each acts individually.”
For supporters of CA100+, there is some comfort in the fact that the vehemence of right-wing attacks on the initiative are in themselves testament to its success.
As it reaches the end of its first five-year term and prepares for a second phase running through to 2030, CA100+ boasts more than 700 members representing $68 trillion of assets.
It has 166 target companies and can point to significant progress against its key asks. The number of firms with a net-zero commitment has risen from just five in 2017 to three-quarters today, while 92 percent have some level of board oversight on climate change and 91 percent have aligned with recommendations from the Task Force on Climate-Related Financial Disclosures.
Simpson was closely involved in CA100+ from well before its launch. The initiative grew out of a carbon footprinting exercise undertaken in 2015 by Californian pension fund CalPERS, where she was managing investment director for board governance and sustainability.
The study found that around 80 companies were responsible for roughly half of the fund’s emissions.
Despite the long lead-in time for the project, however, its founders failed to anticipate just how popular CA100+ would be. Simpson says she thought the group might pull together two dozen asset managers and owners. This proved to be a significant underestimate.
“When we opened the door, the level of enthusiasm was overwhelming. We opened for just six weeks to signatories. We had $26 trillion in six weeks. We were in no way prepared for that. I was like ‘oh hang on a minute, this is a big deal’.”
Similarly, Stephanie Pfeifer, fellow founding member and CEO of the Institutional Investor Group on Climate Change, told Responsible Investor in November that she “can’t believe the scale of it… we were very, very nervous that we wouldn’t get enough people signing up”.
The unexpected attention raised questions around funding, staffing, bringing the investor networks together and ensuring that signatories knew where their responsibilities began and ended.
There was also the challenge of matching companies with investor volunteers best-placed to have an impact.
“We had to do it a bit like wrestling,” Simpson says. “We can’t have featherweights in the ring with heavyweights.” Considerations around exposure, committed long term investment in a company, and investors actually having the staff to go and attend in-person meetings and AGMs were all important considerations, she says.
“We were sort of a victim of our own sudden success, and we had to retrofit the governance and the processes,” says Simpson.
Five years on from launch, CA100+ is still struggling to keep pace with the demands of the investor community. With more than 700 members, the initiative has run out of companies for them to engage with.
One of the proposed reforms for CA100+’s second phase is allowing investors to become full participants by taking part in thematic or sectoral projects, instead of directly engaging with focus companies.
Does the initiative have an upper limit for size? Simpson doesn’t think so. “The work we still have to do is immense. At the moment, I think the important task for all of us is to work out for every individual signatory what is their highest and best use, their area of expertise and their capacity to contribute.
“[It would be good to] say that we’ve got this all under control, everything’s dealt with, no help needed. We are definitely not in that world.”
CA100+ is also not without its critics on the ESG side. It has faced repeated calls from climate activists to go further and faster – but as Simpson notes, this is impossible precisely due to the risk of breaching antitrust laws.
“NGOs ask why aren’t you acting as a group? Why aren’t you giving voting advice?” she says. “We say each signatory has got to follow their own policy, their own analysis. We are all individual signatories to this initiative and we cannot operate as a group.”
Simpson says that this extends to concerns around the initiative’s transparency as well. One of the main criticisms has been that CA100+ does not publish a list of lead investors on each company engagement and that information on how and what engagements are being carried out is scarce outside of stewardship reporting and annual updates.
A public agency such as CalPERS makes many disclosures willingly, as well as being subject to freedom of information laws, while other signatories may be subject to regulations or policies that limit the disclosures they either can or want to make.
“If we were a cabal cracking the whip over everybody, we would say, ‘you must do this and you must do that’,” says Simpson. “That is not the way that this is structured and if we were structured in that way, then maybe the people worrying about antitrust would have something, you know, genuinely to be concerned about.
“Some of what is being asked for can only be decided upon at each signatory. But we need full transparency and accountability on the results, and that for me is why the benchmark is so important.”
Inspired by its success, new initiatives modelled on CA100+ are springing up, such as Advance to tackle human rights engagement, and Nature Action 100 to tackle biodiversity.
Based on the experience of CA100+, Simpson has this advice for the newcomers: “Keep it simple, keep it practical, and keep your fiduciary duty absolutely at the heart of it.”
She adds: “The strength of CA100+ is that we had a clear cohort of [focus] companies that had a significant impact on the issue. That was worked out carefully and we took our time doing it. Investors [need to focus on] the investment thesis because that’s the fiduciary side of the work.”
Looking back from five years on, Simpson feels that the initiative has “broadly” achieved what it set out to do. However, she says: “We have the humility to know that simply getting a stated commitment is not the same as getting something done.
“We’re in the foothills of a long climb. We’re off, we’ve packed our bags and we’ve started, but we’ve got a long way to go.”